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WESCO International, Inc. 2000 Annual Report & Form 10-K

WESCO International, Inc. (NYSE: WCC) is a leading distributor of electrical products and other maintenance, repair and operating (MRO) supplies, and is the nation’s largest provider of integrated supply services. Headquartered in Pittsburgh, Pennsylvania, the company employs approximately 6,000 people,maintains relationships with some 23,000 vendors, and serves more than 130,000 customers worldwide. Major markets include commercial and industrialfirms, contractors, governmental agencies, educational institutions, telecom-munications businesses and utilities. WESCO operates five fully automateddistribution centers and 350 full-service branches in North America and selectedinternational markets, providing a local presence for area customers, and alsosupporting a global network designed to serve multi-location businesses andmulti-national corporations. Net sales in 2000 were $3.9 billion.

For the seventh consecutive year, WESCO International set new records in sales and earnings, with sales growth of 13.4% and a 36% increase in net income.Return on invested capital and return on equity were 14.8% and 27.6%, respectively.

corporate profile

2000 1999 1998

(In millions)

Net sales $ 3,881.1 $ 3,423.9 $ 3,025.4

Gross profit 684.1 616.6 537.7

Income from operations 125.4 125.0 107.8 2

Interest & other expenses 68.7 66.5 55.2

Income before income taxes and extraordinary item 56.7 58.5 52.6 2

EBITDA1 159.8 145.3 122.6

Working capital 240.4 199.0 115.6

Long-term debt (including current portion) 483.3 426.4 595.8

Stockholders’ equity 125.0 117.3 (142.6) 1 Income from operations plus depreciation, amortization, restructuring charge and recapitalization costs2 Excludes recapitalization costs of $51.8 million

Copies of Forms 10-K and 10-Q may be requested through our web site (www.wescodist.com) or by contacting Investor Relations.

financial highlights

NET SALES(In millions)

00

$3,8

81

99

$3,4

24

98

$3,0

25

97

$2,5

95

96

$2,2

75

RETURN ON INVESTED CAPITAL

00

14.8

%

99

15.1

%

98

14.7

%

97

10.7

%

96

10.8

%

EBITDA1

(In millions)

00

$160

99

$145

98

$123

97

$91

96

$79

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rate

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0 Fi

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WESCO’s growth in 2000 was fueled by our ongoing

commitment to the markets and customers we serve.

We are a sales driven company, and our strong

customer focus has led to continuous improvement in

product offerings, processes and bottom-line results.

Being responsive to customer needs makes WESCO the

partner of choice to a growing and diverse group of

some of the world’s best companies.

WESCO is helping customers reach their sourcing,

procurement and materials management goals

through extra effort personal service, coordinated local

and national logistical capabilities, access to our large

and diversified supplier network and cost-effective

e-Commerce solutions. For customers in a wide range

of industry segments, WESCO delivers…

results.

solutions.

pr ducts.

service.

WESCO markets more than 200,000 products, including:• Equipment to distribute and control electrical power• Control and automation equipment to monitor

manufacturing processes• Wiring systems for all power ranges and connection types• Lighting products and cost-saving, energy-control solutions• Data communications products and systems• Contractor tools and supplies• Industrial production support materials

Currently offering more than 200,000 high-quality construction and

maintenance products, WESCO is continuously expanding its product

line well beyond its traditional base. We provide easy access to

products and information that help customers improve operations and

reduce operating costs.

pr d

As procurement specialists, we maintain extensive supplier relationships to provide the best and broadest range of products and services in the industry. Our access to a large number of suppliers allows us to be very competitive on product costs while providing technical training and sales and marketing support to our customers.

WESCO is working to wire the new economy infrastructure by providing state-of-the-art products and services to support construction of high-tech datacenters that lease space and Internetprocessing capacity. Every year our product portfolio changes to capitalize oncurrent needs and development trends.

ucts.

During the past year, WESCO expanded its Internet catalog

to include more than 60,000 industry-standard items. We also acceleratedour development of customized andpersonalized electronic catalogs forspecific companies and departments,designed to enhance procurementwith speed and security, while reducingpaper flow.

<wescodirect.com>

To create new efficiencies in the procurement process — and

continuously reduce supply-chain costs — WESCO has invested wisely

in e-Commerce initiatives. As these initiatives develop, they are

rapidly becoming an important component of the total service

package provided to our national accounts and local market, branch-

based customers.

solut

Through national accounts and integrated supply programs, WESCO provides large, multi-site customers with immediate benefits of aggregated volume discounts and uniform pricing. Equally important are simplified procurement processes and increased operating efficiencies, including integration with corporate information systems and e-Commerce programs.

integratedsupply programs

Efficient linkage between WESCO and its customersclimbed to a new level in 2000 with the introduction of our personalized, portable electronic catalog.WESLink, a wireless e-Commerce ordering system, uses a “Palm Pilot” as its logic platform. WESCO customers can source and order needed products directly from the job site. Leading electrical contractorshave been the first customers to utilize the WESLink system, a major advance in mobile commerce.

ions.WESLink

technical support

24-hour delivery

local branch

With National Account managers “on both sides of the border,” WESCO is meeting the electrical supply needs of companies like Rohm and Haas and American Standard at locations in the United States, Canada and Mexico. Because of our extensive branch network, WESCO can provideconsistent local service and support while adaptingto localized plant operating characteristics andcompany-specific product standardization and inventory optimization efforts.

servcustomer

With a focus on the productivity and cost-reduction goals of our

customers, WESCO continues to deliver bottom-line improvements

and profitability gains. Verifiable results and consistent performance

have led to a growing customer base and an enviable track record in

customer retention — the best indicator of overall customer satisfaction.

national accounts

training

inventory

More than 300 electricians are on the job at Detroit Metropolitan Airport, where one of North America’s largest electrical contractors is constructing a new terminal for Northwest Airlines. WESCO is supplying thousands of electrical and data communication products, and our Major Projects group is providing a host of solutions to address the challenges of large, complex construction projects. These include product staging, local branch inventory, just-in-time delivery, on-site customer training and technical support, as well as special purpose documentation software that records the mapping of the communicationssystem, paving the way for more efficient maintenance, future changes, add-onsand troubleshooting.

product staging

ice.

In recognition of outstanding performance, WESCO receivednumerous customer awards during the past year, including the Ford Q-1 Quality award. WESCO is able to achieve results and meet high service and value expectations by focusing ourquality process on customer satisfaction. WESCO branches in the United States and Canada, along with WESCO International’sheadquarters, are registered ISO 9002 quality assured sites.

AwardQ-1

Skilled and experienced in materials management programs

and process improvement initiatives for companies of all sizes,

WESCO has a proven track record in total cost reductions, with

bottom-line customer savings in a wide range of industries.

F O R D

resu

Seeing proven, documented results of implementedagreements and strategies is the bottom line for mostWESCO customers. We have the capability to provideour customers with customized feedback on demand.Bruckner Supply, a WESCO division dedicated solely to integrated supply programs, is unique in its ability togive customers continuous access to key measurementdata such as fill rate, productivity per employee, costsavings and order transaction performance metrics. Ourkey account program managers work closely with thecustomer in monitoring and analyzing this information to identify areas for operational effectiveness, processrefinements and improvement or corrective action—a valuable service, focused on delivering results.

9%

DOCUMENTED RESULTS

20-40%

COST SAVINGS AND MORE…“Excellent” supplier ratings and proven success on previous systems contracts has led to an expanded relationship with one of the largest public utilities in the U.S. Objectives include a dramatic consolidation of separate supply contracts, product cost reductions,systems improvements and a 9% annual reduction in overall transaction costs.

Included among our major new multi-year agreements is a large Canadian natural resources firm that selectedWESCO to help meet its supply chain productivity andcost-savings targets, including unit cost savings on newpurchases, a 40% reduction in inventory and eliminationof hundreds of hours from transaction processing activities.lts.

The year 2000 was both a rewarding and challenging year for WESCO.

Throughout the year we were faced with new competitors and new

procurement paradigms. We encountered dozens, if not hundreds, of

new well-funded competitors in the form of “dot.com” Internet start-ups,

procurement specialty firms, auction operators and buying groups.

It seemed that most of these entities were targeting WESCO’s key

market segments and our strategic model of coordinated multi-site

procurement. By year’s end, however, we could confidently say that

WESCO’s leadership positions in integrated supply and national

accounts programs for large, multi-site customers were strengthened,

and our market share in these important product and service arenas

had improved. And, with what we’ve learned and accomplished, we’ll

be even stronger in the years ahead.

To Our Shareholders, Employees and Friends

WESCO International, Inc. 2000 Annual Report & Form 10-K 11

Equally as challenging as the onslaught of new competitors have been the shifts occurring in the general economy.A significant amount of WESCO’s business is associated with new construction or capital projects, new machineryor equipment installations and the subsequent operation and on-going maintenance of facilities and equipment.WESCO’s best customers and best opportunities are often found in large, production-driven “old economy”industries and the capital-intensive segments of the “new economy.” Since the 1998 Asian financial crisis, itseems that one major industry after another, from mining to petroleum to steel, then autos and now semicon-ductors has been in a retrenchment phase. As a result, we’ve had to cope with spending cuts, plant closings,consolidations, downsizing and capital project deferrals. But because a large part of WESCO’s strength resultsfrom our broad scope of industry coverage, geographical diversification and national marketing initiatives, we’ve been able to add customers and shift resources into growing markets. We were well positioned in major construc-tion markets, and our sales efforts with large companies seeking improved or re-engineered procurement capabilitiescontinued to be successful. We’ve also experienced significant growth in technology-driven industries and in a wide range of commercial operations that have had to expand power and wiring systems to support their data-driven, 24 hours-per-day operations. Through it all, WESCO has been able to deliver. Our marketing strategies areworking. Our organizational breadth has provided stability. And, we continue to grow and prosper.

FINANCIAL RESULTSSales for 2000 increased 13% over the prior year to $3.9 billion. Net income before extraordinary items andrestructuring charges increased from $35.1 million in 1999 to $39.4 million in 2000. While net income improved,it was below our objectives due to restructuring and other non-recurring charges taken in the fourth quarter inresponse to the weaker economic environment.

We know that the economy has weakened, but the Company is anticipating that sales will continue to grow in 2001as a result of new customer programs initiated late in 2000. Perhaps more importantly, we expect to see meaning-ful improvements in operating margins. Cost reduction and working capital management initiatives begunduring the fourth quarter will continue to receive attention. I expect that our biggest gains will come from personnel productivity, which is our number one priority for 2001. While we have a very effective sales and service organization today, we expect new training and information systems capabilities to drive furthergains in the very important performance measures of sales and margin per employee.

Recognizing the value to our shareholders, we continued our share repurchase program throughout 2000, purchasing 3.3 million shares. Toward the end of 2000, the opportunity to make strategic and financially attractive acquisitions of distribution companies began to improve. Accordingly, we’ve shifted resources away from the share repurchase program to be better positioned to complete additional acquisitions.

ACQUISITIONSDuring 2000 WESCO completed three acquisitions that added sales coverage in selected local markets and added significantly to our product and service offerings. Control Corporation of America (CCA), based inRichmond, Virginia, has eight sales and service locations in the Southeast. CCA is a specialist in industrialautomation applications, with particular expertise in the marine, food processing and textile industries. KVASupply Company is a utility products distributor with unique product and technical support capabilities. Thisfour-location distributor operating primarily in the Western states, provides high performance and high qualitysplicing and termination products for electrical power and telecommunications cables. Orton Utility Supply added needed local distribution capabilities for utility products in the Southeast. On a combined basis, these three acquisitions generate annual sales of approximately $90 million.

In March of 2001, we strengthened our premier position in the utility products distribution market by acquiringHerning Enterprises, Inc. With sales of $110 million and 10 branch locations, Herning serves utility and tele-communications contractors in key urban areas of California, Washington, Arizona, and Utah.

PRODUCTS AND SERVICESWESCO is fundamentally a sales driven company, specializing in electrical equipment and a broad range ofmaintenance related products. We maintain inventories of hundreds of thousands of items used in the daily work of contractors, maintenance personnel and service technicians. When electrical equipment and other maintenance or production materials are needed, WESCO delivers.

12 WESCO International, Inc. 2000 Annual Report & Form 10-K

In response to customer requests, we have evolved into a services company as well. Customers of all types relyon WESCO personnel to perform a variety of purchasing-related functions on their behalf. It is routine for us to identify, locate and procure hard-to-find replacement or spare parts. Similarly, when critical equipment fails we are called on for troubleshooting advice, technical support or emergency repairs.

The most extensive and comprehensive service package available from WESCO is called Integrated Supply.Customers utilize this service to outsource some or all of their procurement, inventory control and logistics coordination activities to WESCO. We handle the paperwork, the purchasing and receiving, the storerooms andin-plant logistics and the continuous improvement cost reduction programs. We become the single source forassuring that needed products and services get delivered.

E-COMMERCEThe extraordinary hype surrounding e-Commerce and purchasing via Internet applications has died down. This is a good thing, because far too many start-up companies were making bold promises, and they simply could notdeliver. Nevertheless, in spite of the demise of many purchasing-oriented “dot.com” companies, e-Commerce initiatives are strong and growing at WESCO and at many of the industrial, contractor and commercial firms thatwe transact business with today. The extraordinary growth expectations for e-business transactions have not yetmaterialized, but nothing can stop the progressive advance of technologies so significant and pervasive as tele-communications and the Internet. We currently have the technology in place to deliver operational efficiencies viae-Commerce solutions, and our investment program continues at a pace comparable to 2000. Our e-Commerceand Information Systems teams are highly organized and very proficient at getting customers connected and setup to use WESCO’s electronic catalogs and Internet procurement capabilities. We have demonstrated good ROIfor customers who have millions of dollars invested in the underlying technologies required for e-Commerce.

Over the past year we’ve deployed our comprehensive electronic catalogs at many customers. We also haveprominent positions with the leading industry trade exchanges and e-procurement portals. We have outstandingtechnology, refined customer implementation processes and experienced staff, and we will continue to invest inthis important part of our business. Our commitment in e-Commerce is that we will deliver what our customerswant, how they want it, with a good return in the process.

BOARD OF DIRECTORSGeorge L. Miles, Jr., Chief Executive Officer of WQED Pittsburgh, a public broadcasting network, joined ourBoard of Directors in April. George has both a financial and operating background and brings a variety of technology, regulatory and community relations experience to our organization. With this addition, our Board of Directors now consists of eight members.

LOOKING AHEADWithout a doubt, we are a stronger company today than we were a year ago. In both the “old” and the “new”economies, we have succeeded through quick response to customer needs and an ongoing flexibility in adaptingto new sales and service models. One of the most positive aspects of our business is that we operate in a largeand fundamentally strong industry that provides multiple channels for growth—and we intend to take full advantage of the possibilities. With the proven success of our business strategies, a long-standing focus and cultural commitment to customer service and our continuing selection as preferred supplier by some of thelargest and most sophisticated companies in the world, we look forward to another good year in 2001.

Roy W. HaleyChairman and Chief Executive Officer

March 20, 2001


UNITED STATESSECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-14989

WESCO INTERNATIONAL, INC.(Exact name of registrant as specified in its charter)

Delaware 25-1723342

(State or other jurisdiction of (I.R.S. Employerincorporation or organization) Identification No.)

Commerce Court 15219Four Station Square, Suite 700 (Zip Code)

Pittsburgh, Pennsylvania(Address of principal executive offices)

(412) 454-2200

(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of Class Name of Exchange on which registeredCommon Stock, par value $.01 per share New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to such filing requirements for at least thepast 90 days. Yes [ X ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not con-tained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

As of February 22, 2001, 40,158,973 shares of Common Stock, par value $.01 per share (“Common Stock”)and 4,653,131 shares of Class B Common Stock, par value $.01 per share (“Class B Common Stock”) of theregistrant were outstanding. The registrant estimates that as of February 22, 2001, the aggregate market valueof the voting shares held by non-affiliates of the registrant was approximately $154.1 million based on theclosing price on the New York Stock Exchange for such stock.

DOCUMENTS INCORPORATED BY REFERENCE:

Part III of this Form 10-K incorporates by reference portions of the registrant’s Proxy Statement.


part iItem 1 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Item 2 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Item 3 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Item 4 Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

part iiItem 5 Market for Registrant’s Common Stock and Related Stockholder Matters . . . . . . . 24

Item 6 Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Item 7A Quantitative and Qualitative Disclosures About Market Risks . . . . . . . . . . . . . . . . . . 31

Item 8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

part iiiItem 10 Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Item 11 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Item 12 Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . 32

Item 13 Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

part ivItem 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . . 33

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Index to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

table of contents

WESCO International, Inc.December 31, 2000


part i

Item 1. Business

In this Annual Report on Form 10-K, “WESCO”refers to WESCO International, Inc., and its sub-sidiaries and its predecessors unless the contextotherwise requires. References to “we,” “us,” “our” and the “Company” refer to WESCO and its subsidiaries. Our subsidiaries include WESCODistribution, Inc. (“WESCO Distribution”) and WESCO Distribution — Canada, Inc. (“WESCO Canada”), both of which are wholly-owned by WESCO.

OVERVIEWWith sales of almost $3.9 billion in 2000, we are a leading provider of electrical products and otherindustrial MRO supplies and services in NorthAmerica. We are the second largest distributor in the $79 billion U.S. electrical distribution industry,which has grown at a compounded annual rate ofapproximately 7% over the last 15 years. We are also a provider of Integrated Supply services. OurIntegrated Supply solutions and outsourcing servicesfulfill all of a customer’s industrial MRO procurementneeds through a highly automated, proprietary electronic procurement and inventory replenishmentsystem. Demand for Integrated Supply services hasincreased approximately 56% annually since 1994,and the total U.S. market potential, measured as allpurchases of industrial MRO supplies and services, is estimated to be $260 billion.

We have over 350 branches and five distribution centers located in 48 states, nine Canadian provinces,Puerto Rico, Mexico, Guam, the United Kingdom andSingapore. We serve over 130,000 customers world-wide, offering over 1,000,000 products from over23,000 suppliers. Our diverse customer base includesa wide variety of industrial companies; contractors for industrial, commercial and residential projects;utility companies; and commercial, institutional andgovernmental customers.

We have acquired 24 companies since August 1995,representing annual sales of approximately $1.3 billion. Combining strong internal growth withacquisitions, our net sales and earnings before inter-est, taxes, depreciation and amortization (“EBITDA”)(as defined in Item 6 “Selected Financial Data”) haveincreased at a compounded annual growth rate ofapproximately 16% and 31%, respectively, since 1994.

INDUSTRY OVERVIEW

Electrical Distribution

With 2000 sales estimated at $79 billion, the U.S.industry is large and growing. The industry is also stable with compounded annual growth of 7% since 1985, and it is projected to grow another 7% in 2001. The U.S. electrical distribution industry is also highly fragmented. In 1999, the latest year forwhich data is available, the four national distributors,including WESCO, accounted for less than 16% ofestimated total industry sales.

Integrated Supply

Demand for Integrated Supply services is growingrapidly, as more companies realize they can lowercosts by outsourcing their MRO procurement andrelated services. Since the customer’s costs of procur-ing high volumes of low dollar value MRO suppliescan be over 50% of the cost of the products, suchimprovements can be significant. The total market forMRO industrial supplies is approximately $260 billion.Within that market, Integrated Supply has more thandoubled from $5 billion in 1997 to over $10 billion in 2000 or 27% per year. Recent projections estimatethat the Integrated Supply market will reach $18.4 bil-lion by 2004.

OUR BUSINESS STRATEGYOur objective is to be the leading provider of electricalproducts and other MRO supplies and services tocompanies in North America and selected internation-al markets. In achieving this leadership position, ourgoal is to grow earnings at a faster rate than sales byfocusing on margin enhancement and continuous pro-ductivity improvement. Our growth strategy leveragesour existing strengths and focuses on developing newinitiatives and programs.

Enhance Our Leadership Position in ElectricalDistribution. We intend to leverage our extensivemarket presence and brand equity in the WESCOname to further our leadership position in electricaldistribution. We are the second largest electrical distributor in the U.S. and, through our value-addedproducts and services, we believe we have become the industry leader in serving several important andgrowing markets including:

■ industrial customers with large, complex plantmaintenance operations, many of which require a national multi-site service solution for their electrical distribution product needs;


■ large contractors for major industrial and commercialconstruction projects;

■ the electric utility industry; and■ manufacturers of factory-built homes, recreational

vehicles and other modular structures.

Grow National Programs. Since 1994, revenue from our National Accounts program has increased inexcess of 15% annually. We will continue to invest inthe expansion of this program. Through our NationalAccounts program, we coordinate electrical MROprocurement and purchasing activities primarily forlarge industrial and commercial companies acrossmultiple locations. We have well established relation-ships with over 300 companies, providing us with a recurring base of revenue through multi-year agreements. Our objective is to continue to increaserevenue generated through our National Accounts program by:

■ increasing sales to existing National Account customers through new products, more services and additional locations;

■ extending established National Account relationshipsto include Integrated Supply;

■ expanding our customer base by leveraging ourexisting expertise and presence within the auto-motive, petrochemical, pulp and paper, metals and mining industries and food processing; and

■ building strong positions in additional industry segments such as multi-site retail, financial, commercial and telecommunications.

In addition, through our Major Projects Group, we are increasing our focus on large projects such asindustrial sites, water treatment plants, airport expan-sions, healthcare facilities, correctional institutionsand new sports stadiums. We intend to secure newMajor Projects contracts through:

■ aggressive national marketing of our demonstratedproject management capabilities;

■ further development of relationships with leadingcontractors and engineering firms;

■ close coordination with National Accounts customers on their renovation and new plantimprovement projects; and

■ comprehensive materials management services,involving a multi-commodity Integrated Supplyapproach to contractor materials for large projects.

Extend Our Leadership Position in IntegratedSupply. We are the largest provider of IntegratedSupply services for MRO goods and services in theUnited States. We provide a full complement of out-sourcing solutions, focusing on improving the supplychain management process for our customers’ indirectpurchases. Our Integrated Supply programs replace the traditional multi-vendor, resource-intensive procurement process with a single, outsourced, fullyautomated process capable of managing all MRO and related service requirements. Our solutions rangefrom timely product delivery to assuming full respon-sibility for the entire procurement function. Our customers include some of the largest industrial com-panies in the United States. Competitive strengths ofour Integrated Supply business include:

■ a proven and profitable business model highlyadaptable to the scale of our customers’ operations;

■ low operating costs;■ highly automated proprietary information systems;

and■ established relationships with a large industrial

customer base.

We intend to utilize these competitive strengths toincrease our Integrated Supply sales to both new andexisting customers, including our existing NationalAccount customers.

Gain Share in Key Local Markets. Significantopportunities exist to gain local market share, sincemany local markets are highly fragmented. We intendto increase our market share in key geographic marketsthrough a combination of increased sales and market-ing efforts at existing branches, acquisitions to expandour product and customer base and new branch open-ings. Furthermore, we intend to leverage our existingrelationships with preferred suppliers to increase salesof their products in local markets through various initiatives, including sales promotions, cooperativemarketing efforts, direct participation by suppliers inNational Accounts implementation, dedicated salesforces and product exclusivity. To promote growth,we have instituted a compensation system for branchmanagers based on sales and profit increases and efficient working capital management at the branchlevel. Our compensation system encourages ourbranch managers to increase sales and optimize business activities in their local markets, includingmanaging the sales force, configuring inventories, targeting potential customers for marketing efforts and tailoring local service options.


Pursue Strategic Acquisitions. We have completed24 acquisitions since August 1995, which representannual sales of approximately $1.3 billion. We believethat the highly fragmented nature of the electrical andindustrial MRO distribution industry will provide uswith a number of acquisition opportunities. We utilizea disciplined approach toward acquisitions whichincludes well-defined strategic criteria and establishedtargets for return on investment and earnings accretion.

Expand Product and Service Offerings. We contin-ue to build on our demonstrated ability to introducenew products and services to meet customer demandsand capitalize on market opportunities. WESCO iscommitted to developing new customers in the educa-tion, retail, healthcare, financial services, governmentand telecommunications market segments. As themarket for data and electrical products converge,WESCO has integrated our Data Communicationsefforts into our core electrical business. Our existingelectrical sales force has been trained to sell datacommunications products resulting in significant newdata and electrical projects with large commercialbanks, schools and telecommunications serviceproviders. In addition, through our WR ControlsDivision, we now have the platform to sell integratedlighting control and power distribution equipment in a single package for multi-site specialty retailers,restaurant chains and department stores. This is another attractive growth market where our NationalAccounts strategies and logistics infrastructure provides measurable benefits for renovation, new construction and ongoing maintenance activities.

Leverage our e-Commerce and InformationSystem Capabilities. We conduct a significant amountof business electronically and continue to invest ininformation technology to create tighter linkages withboth customers and suppliers. Our electronic transac-tion management capabilities lower costs and shortencycle time in the supply chain process for our cus-tomers and for us by:

■ routinely processing customer orders, shippingnotices, supplier purchase orders and funds transferelectronically with our trading partners;

■ creating tighter linkages to both customers and suppliers through the use of technologicaladvances, including an ability to check productavailability, receive pricing information, and orderproduct real-time directly from branches or over the Internet;

■ providing low cost, highly functional processing of a full-range of our business operations such as customer service, inventory, logistics manage-ment, accounting and administrative support; and

■ analyzing market potential, sales performance andcost of doing business by branch, customer, product,sales representative and shipment type enabling usto work with customers to streamline activities andreduce costs.

Expand Our International Operations. Our inter-national sales, the majority of which are in Canada,accounted for 10% of sales in 2000. We believe thatthere is significant additional demand for our productsand services outside the U.S. and Canada. Many ofour multinational domestic customers are seeking dis-tribution, Integrated Supply and project managementsolutions globally. Our approach to international oper-ations is consistent with our domestic philosophy. We follow our established customers and pursue business that we believe utilizes and extends ourexisting capabilities. This strategy of working throughwell-developed customer and supplier relationshipsreduces risks and provides the opportunity to establisha profitable business. We continue to pursue growthopportunities in existing locations such as Aberdeen,Scotland; London, England and Mexico as well astake advantage of various export opportunities inLatin America and Africa. To take advantage of thesegrowth opportunities, WESCO is working towardforming strategic alliances in critical markets.

ACQUISITION AND INTEGRATION PROGRAM Our strategic acquisition program has been an impor-tant element in our objective to be the leader in themarkets we serve. Our philosophy toward growthincludes a continuous evaluation to determine whethera particular opportunity, capability or customer needis best developed internally or purchased through astrategic acquisition. We believe that the highly frag-mented nature of the electrical distribution industrywill continue to provide us with a significant numberof acquisition opportunities. We continue to evaluatepotential acquisitions, including those in the electricaldistribution industry, the Integrated Supply marketand other non-electrical distributors that would complement our customers’ overall supply needs.However, as we continue to improve our internalcapabilities, the strategic and financial benefits fromacquisitions will be evaluated more critically. Wehave completed 24 acquisitions since August 1995,representing total annual sales of approximately$1.3 billion.


WESCO Acquisition History (Dollars in millions)

Branch Year Acquisitions Locations Annual Sales 1

1995 2 2 $ 47

1996 7 67 418

1997 2 9 52

1998 6 21 608

1999 4 5 70

2000 3 17 92

Total 24 121 $ 1,2871 Represents our estimate of annual sales of acquired businesses at the time ofacquisition, based on our review of internal and/or audited statements of theacquired business.

In March 2001, WESCO completed its acquisition of all of the outstanding common stock of HerningUnderground Supply, Inc. and Alliance UtilityProducts, Inc. (collectively “Herning”) headquarteredin Hayward, California. Herning, a distributor of gas,lighting and communication utility products, reportednet sales of approximately $112 million in 2000. Thisacquisition will be accounted for under the purchasemethod of accounting.

Our business development department consists of asmall team of professionals who locate, evaluate andnegotiate all aspects of any acquisition, with particularemphasis on compatibility of management philosophyand strategic fit. Since 1995, we have considered over 300 potential acquisitions. We initially evaluatepotential acquisitions based on their ability to:

■ better serve our existing customers; ■ offer expansion into key growth markets; ■ add new product or service capabilities;■ support new National Account customers; and■ strengthen relationships with important

manufacturers.

PRODUCTS AND SERVICES Products. Our network of branches and distributioncenters stock over 215,000 product stock keepingunits (“SKUs”). Each branch tailors its inventory tomeet the needs of the customers in its local market,typically stocking approximately 4,000 to 8,000 SKUs.Our Integrated Supply business allows our customersto access over 1,000,000 products for direct shipment.

Representative products that we sell include:

■ Supplies: Fuses, terminals, connectors, boxes, fittings, tools, lugs, tape and other MRO supplies

■ Distribution Equipment: Circuit breakers, trans-formers, switchboards, panelboards and busway

■ Lighting: Lamps (light bulbs), fixtures and ballasts ■ Wire and Conduit: Wire, cable, metallic and

non-metallic conduit■ Control, Automation and Motors: Motor control

devices, drives, programmable logic controllers,pushbuttons and operator interfaces

■ Data Communications: Premise wiring, patch panels, terminals, connectors

We purchase products from a diverse group of over23,000 suppliers. In 2000, our ten largest suppliersaccounted for approximately 32% of our purchases.The largest of these was Eaton Corporation, throughits Cutler-Hammer division, accounting for approxi-mately 13% of total purchases. No other supplieraccounted for more than 5%.

Our supplier relationships are important to us, provid-ing access to a wide range of products, technicaltraining and sales and marketing support. We havepreferred supplier agreements with approximately 150 of our suppliers and purchase approximately 65% of our stock inventory pursuant to these agree-ments. Consistent with industry practice, most of ouragreements with suppliers, including both distributionagreements and preferred supplier agreements,are terminable by either party on no more than60 days’ notice.

Services. In conjunction with product sales, we offercustomers a wide range of services and procurementsolutions that draw on our product and supplymanagement expertise and systems capabilities. These services include National Accounts programs,Integrated Supply programs and Major Project programs. We are responding to the needs of our customers, particularly those in processing and manu-facturing industries. To more efficiently manage theMRO process on behalf of our customers, we offer a range of supply management services, including:

■ outsourcing of the entire MRO purchasing process;■ providing manufacturing process improvements

using state-of-the-art automated solutions;■ implementing inventory optimization programs;■ participating in joint cost savings teams;■ assigning our employees as on-site support personnel;■ recommending energy-efficient product

upgrades; and■ offering safety and product training for customer

employees.


National Accounts Programs. The typical NationalAccount customer is a Fortune 500 industrial company,a large utility or other major customer, in each case with multiple locations. Our National Accounts programs provide customers with total supply chaincost reductions by coordinating purchasing activityfor MRO supplies across multiple locations.Comprehensive implementation plans establish jointly-managed teams at the local and national level toprioritize activities, identify key performance measuresand track progress against objectives. We involve our preferred suppliers early in the implementationprocess, where they can contribute expertise and prod-uct knowledge to accelerate program implementationand the achievement of cost savings and processimprovements.

Integrated Supply Programs. Our Integrated Supplyprograms offer customers a variety of services to support their objectives for improved supply chainmanagement. We integrate our personnel, product and distribution expertise, electronic technologies andservice capabilities with the customer’s own internalresources to meet particular service requirements.Each Integrated Supply program is uniquely config-ured to deliver a significant reduction in the numberof MRO suppliers, reduce total procurement costs,improve operating controls and lower administrativeexpenses. Our solutions range from just-in-time fulfillment to assuming full responsibility for theentire procurement function for all indirect purchases.We believe that customers will increasingly seek toutilize us as an “integrator,” responsible for selectingand managing the supply of a wide range of MROand OEM products.

Major Projects. We have a Major Projects Group,comprised of our most experienced construction man-agement personnel, which focuses on serving thecomplex needs of North America’s largest engineeringand construction firms and the top 50 U.S. electricalcontractors on a multi-regional basis. These con-tractors typically specialize in building industrialsites, water treatment plants, airport expansions,healthcare facilities, correctional institutions and new sports stadiums.

MARKETS AND CUSTOMERS We have a large base of approximately 130,000 customers diversified across our principal markets. While one customer accounted for approximately 3% of 2000 sales, no other customer accounted formore than 2%.

Industrial Customers. Sales to industrial customers,which include numerous manufacturing and processindustries, and original equipment manufacturers(“OEMs”) accounted for approximately 43% of oursales in 2000.

MRO products are needed to maintain and upgrade theelectrical and communications networks at all industrialsites. Expenditures are greatest in the heavy processindustries, such as food processing, pulp and paper andpetrochemical. Typically, electrical MRO is the first or second ranked product category by purchase valuefor total MRO requirements for an industrial site.Other MRO product categories include, among others,lubricants; pipe, valves and fittings; fasteners; cuttingtools and power transmission products.

OEM customers incorporate electrical componentsand assemblies into their own products. OEMs typically require a reliable, high volume supply of anarrow range of electrical items. Customers in thissegment are particularly service and price sensitivedue to the volume and the critical nature of the productused, and they also expect value-added services suchas design and technical support, just-in-time supplyand electronic commerce.

Electrical Contractors. Sales to electrical contractorsaccounted for approximately 36% of our sales in2000. These customers range from large contractorsfor major industrial and commercial projects, the customer types we principally serve, to small residen-tial contractors, which represent a small portion of our sales. Electrical products purchased by electricalsub-contractors typically account for approximately40% to 50% of their installed project cost, and, therefore, accurate cost estimates and competitivematerial costs are critical to a contractor’s success in obtaining profitable projects.

Utilities. Sales to utilities accounted for approxi-mately 16% of our sales in 2000. This marketincludes large investor-owned utilities, rural electriccooperatives and municipal power authorities. Weprovide our utility customers with power line productsand an extensive range of supplies to meet their MRO and capital projects needs. Full materials managementand procurement outsourcing arrangements are also important in this market as cost pressures andderegulation cause utility customers to streamline purchasing and inventory control practices.


Commercial, Institutional and GovernmentalCustomers (“CIG”). Sales to CIG customersaccounted for approximately 5% of our sales in 2000.This fragmented market includes schools, hospitals,property management firms, retailers and governmentagencies of all types. Through our WR ControlsDivision, we now have a platform to sell integratedlighting control and distribution equipment in a singlepackage for multi-site specialty retailers, restaurantchains and department stores.

DISTRIBUTION NETWORK Branch Network. We have over 350 branches, ofwhich approximately 290 are located in the U.S.,approximately 50 are located in Canada and theremainder are located in Puerto Rico, Mexico, Guam,the United Kingdom and Singapore. Over the lastthree years, we have opened approximately sevenbranches per year, principally to service NationalAccount customers. In addition to consolidations inconnection with acquisitions, we occasionally close or consolidate existing branch locations to improveoperating efficiency.

Distribution Centers. To support our branch network,we have five distribution centers located in the United States and Canada, including facilities locatednear Pittsburgh, Pennsylvania, serving the Northeastand Midwest U.S.; near Reno, Nevada, serving theWestern U.S.; near Memphis, Tennessee, serving the Southeast and Central U.S.; near Montreal, Quebec,serving Eastern and Central Canada; and nearVancouver, British Columbia, serving Western Canada.

Our distribution centers add value for our branchesand customers through the combination of a broadand deep selection of inventory, on-line ordering,same day shipment and central order handling andfulfillment. Our distribution center network reducesthe lead-time and improves the reliability of our sup-ply chain, giving us a distinct competitive advantagein customer service. Additionally, the distribution centers reduce the time and cost of supply chain activities through automated replenishment and ware-house management systems, and economies of scalein purchasing, inventory management, administrationand transportation.

SALES ORGANIZATION General Sales Force. Our general sales force is basedat the local branches and comprises approximately2,200 of our employees, almost half of whom are outside sales representatives and the remainder areinside sales personnel. Outside sales representatives,who have an average of more than eight years ofexperience with us, are paid under a compensationstructure which is heavily weighted towards commissions. They are responsible for making directcustomer calls, performing on-site technical support,generating new customer relations and developingexisting territories. The inside sales force is a keypoint of contact for responding to routine customerinquiries such as price and availability requests andfor entering and tracking orders.

National Accounts. Our National Accounts salesforce is comprised of an experienced group of salesexecutives who negotiate and administer contracts,coordinate branch participation and identify sales andservice opportunities. National Accounts managers’efforts are aligned by targeted customer industries,including automotive, pulp and paper, petrochemical,steel, mining and food processing.

Data Communications. Sales of premise cable, connectors, hardware, network electronics and outsideplant products are generated by our general sales force and a dedicated group of outside and inside data communications sales representatives. They aresupported by a centralized customer service center and additional resources in product management, purchasing, inventory control and sales management.We also have a training organization that provides ourgeneral sales force and customers with state-of-the-art,industry certified product and installation training.

Major Projects. Since 1995 our group of experiencedsales managers target, on a national basis, the marketfor large construction projects with electrical materialvalued in excess of $1 million. Through the MajorProjects Group, we can meet the needs of contractorsfor complex construction projects such as new sportsstadiums, industrial sites, water treatment plants, airport expansions, healthcare facilities and correc-tional institutions.

e-Commerce. We established our initial electroniccatalog on the Internet in 1996. Since that time, wehave worked with a variety of large customers toestablish customized electronic catalogs for their usein internal systems. Additionally, in 1999 we began a process of providing electronic catalogs to multiple e-Commerce service providers, trade exchanges andindustry specific electronic commerce portals. Our


e-business strategy is to serve existing customers bytailoring our catalog and Internet-based procurementapplications to their internal systems or through theirpreferred technology and trading exchange partner-ships. Additionally, we have entered into severale-business partnerships with leading technology ormarketing oriented e-portals that target selected mar-ket segments and will continue to do so. Throughthese niche oriented marketing arrangements, weexpect to reach thousands of new customers who werepreviously not served through WESCO’s sales force.

We have initiated “WESCO Direct,” a new direct ship fulfillment operation, responsible for supportingsmaller customers and select national account loca-tions. Customers can order over 35,000 electrical anddata communications products stocked in WESCOwarehouses through a centralized customer servicecenter or over the Internet on wescodirect.com. Aproactive telesales approach utilizing catalogs, directmail, e-mail and personal phone selling is used to provide a high level of customer service. In support of this initiative, WESCO recently introduced a lighting catalog and is in the process of completing a new comprehensive electrical catalog.

INTERNATIONAL OPERATIONS To serve the Canadian market, we operate a networkof approximately 50 branches in nine provinces.Branch operations are supported by two distributioncenters located near Montreal and Vancouver. Withsales of approximately US $320 million, Canada represented 8.2% of our total sales in 2000. TheCanadian market for electrical distribution is consid-erably smaller than the U.S. market, with roughly US $2.9 billion in total sales in 2000, according to industry sources.

We sell internationally through domestic export sales offices located within North America and salesoffices in international locations. We have operationsin Aberdeen, Scotland and London, England to support our sales efforts in Europe, Africa and the former Soviet Union, and an office in Singapore to support our sales in Asia. We also have branchoperations in Mexico.

MANAGEMENT INFORMATION SYSTEMS Our corporate information system, WESNET, providesprocessing for a full range of our business operations,such as customer service, inventory and logisticsmanagement, accounting and administrative support.The system utilizes decision support, executive infor-mation system analysis and retrieval capabilities toprovide extensive operational analysis and detailedincome statement and balance sheet variance andtrend reporting at the branch level. The system alsoprovides activity-based costing capabilities for analyzing profitability by customer, sales representa-tive and shipment type. Sales and margin trends and variances can be analyzed by branch, customer, product category, supplier or account representative.

The WESNET system is fully distributed withinWESCO, and every branch (other than our BrucknerIntegrated Supply Division and certain newlyacquired branches) utilizes its own computer systemto support local business activities. All branch operations are linked through a wide area network tocentralized information on inventory status in our distribution centers as well as other branches and an increasing number of on-line suppliers. Recentadvances in WESNET capabilities make it possible toconsolidate administrative and procurement functions,and bring systematic improvement through new pric-ing systems and controls. EESCO, one of our largestacquisitions to-date, was integrated into the WESNETsystem during the third quarter of 2000.

We routinely process customer orders, shippingnotices, suppliers’ purchase orders, and funds transfervia EDI transactions with our trading partners. Ourelectronic commerce strategy calls for tighter linkagesto both customers and suppliers through greater use of technological advances, including Internet andelectronic catalogs, enhanced EDI and other inno-vative improvements.

Our Integrated Supply services are supported by ourproprietary procurement and inventory managementsystems. These systems provide a fully integrated,flexible supply chain platform that currently handlesover 95% of our Integrated Supply customers’transactions electronically. Our configuration options for a customer range from on-line linkages to the customer’s business and purchasing systems, to total replacement of a customer’s procurement andinventory management system for MRO supplies.


COMPETITIONWESCO operates in a highly competitive industry.We compete directly with national, regional and localproviders of electrical and other industrial MRO sup-plies. Competition is primarily focused on the localservice area, and is generally based on product linebreadth, product availability, service capabilities andprice. Another source of competition is buying groupsformed by smaller distributors to increase purchasingpower and provide some cooperative marketing capability. While increased buying power mayimprove the competitive position of buying groupslocally, we believe these groups have not been able to compete effectively with us for National Accountcustomers due to the difficulty in coordinating adiverse ownership group. During 1999 and 2000numerous special purpose Internet-based procurementservice companies, auction businesses, and tradeexchanges were organized. Many of them targetedindustrial MRO and contractor customers of the typeserved by WESCO. WESCO responded with its owne-Commerce capabilities and as of year-end 2000,business losses, if any, to competitors of this typewere minimal. We expect that numerous new com-petitors will develop over time as Internet-basedenterprises become more established and refine theirservice capabilities.

EMPLOYEES As of December 31, 2000, we had approximately6,000 employees worldwide, of which approximately5,200 were located in the U.S. and approximately 800in Canada and our other international locations. Lessthan 5% of our employees are represented by unions.We believe our labor relations are generally good.

INTELLECTUAL PROPERTY Our trade and service marks, including “WESCO,”“the extra effort people®,” and the running mandesign, are filed in the U.S. Patent and TrademarkOffice, the Canadian Trademark Office and theMexican Instituto de la Propriedad Industrial.

ENVIRONMENTAL MATTERS We believe that we are in compliance in all materialrespects with applicable environmental laws. We donot expect significant capital expenditures for envi-ronmental control matters in the current year or in the near future.

FORWARD LOOKING INFORMATION This Annual Report on Form 10-K contains various“forward looking statements” within the meaning ofthe Private Securities Litigation Reform Act of 1995.These statements involve certain unknown risks and uncertainties, including, among others, those contained in Item 1, “Business” and Item 7,“Management’s Discussion and Analysis of FinancialCondition and Results of Operations.” When used inthis Annual Report on Form 10-K, the words “antici-pates,” “plans,” “believes,” “estimates,” “intends,”“expects,” “projects” and similar expressions mayidentify forward looking statements, although not allforward looking statements contain such words. Suchstatements, including, but not limited to, our state-ments regarding business strategy, growth strategy,productivity and profitability enhancement, competi-tion, new product and service introductions andliquidity and capital resources are based on manage-ment’s beliefs, as well as on assumptions made by,and information currently available to, management,and involve various risks and uncertainties, some ofwhich are beyond our control. Our actual resultscould differ materially from those expressed in anyforward looking statement made by or on our behalf.In light of these risks and uncertainties, there can beno assurance that the forward looking informationwill in fact prove to be accurate. We have undertakenno obligation to publicly update or revise any forwardlooking statements, whether as a result of new infor-mation, future events or otherwise.

Item 2. Properties

We have over 350 branches, of which approximately290 are located in the U.S., approximately 50 arelocated in Canada and the remainder are located inPuerto Rico, Mexico, Guam, the United Kingdom and Singapore. Approximately 30% of branches areowned facilities, and the remainder are leased.

The following table summarizes our distribution centers:

Location Square Feet Leased/Owned

Warrendale, PA 252,700 Owned and Leased

Sparks, NV 196,800 Leased

Byhalia, MS 148,000 Owned

Dorval, QE 90,000 Leased

Burnaby, BC 34,300 Owned

We also lease our 76,200 square foot headquarters inPittsburgh, Pennsylvania. We do not regard the realproperty associated with any single branch location asmaterial to our operations. We believe our facilitiesare in good operating condition.


Item 3. Legal Proceedings

We are party to routine litigation incidental to ourbusiness. We do not believe that any legal proceedingsto which we are a party or to which any of our prop-erty is subject will have a material adverse effect onour financial position or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of the Company’ssecurity holders during the fourth quarter of 2000.

EXECUTIVE OFFICERSOur executive officers and their respective ages andpositions are set forth below.

Name Age Position

Roy W. Haley 54 Chairman and Chief Executive Officer

William M. Goodwin 55 Vice President, Operations

James H. Mehta 45 Vice President, Business Development

Robert B. Rosenbaum 43 Vice President, Operations

Patrick M. Swed 57 Vice President, Operations

Donald H. Thimjon 57 Vice President, Operations

Ronald P. Van, Jr. 40 Vice President, Operations

Stephen A. Van Oss 46 Vice President and Chief Financial Officer

Daniel A. Brailer 43 Secretary and Treasurer

Set forth below is biographical information for ourexecutive officers and directors listed above.

Roy W. Haley became Chairman of the Board inAugust 1998. Mr. Haley has been Chief ExecutiveOfficer and a director of WESCO since February1994. From 1988 to 1993, Mr. Haley was an execu-tive at American General Corporation, a diversifiedfinancial services company, where he served as Chief Operating Officer and as President and Director.Mr. Haley is also a director of United Stationers, Inc.and Cambrex Corporation.

William M. Goodwin has been Vice President,Operations of WESCO since March 1994. Since1987, Mr. Goodwin has served as a branch, districtand region manager for WESCO in various locationsand also served as Managing Director of WESCOSA,a former Westinghouse affiliated manufacturing anddistribution business in Saudi Arabia.

James H. Mehta has been Vice President, BusinessDevelopment of WESCO since November 1995.From 1993 to 1995, Mr. Mehta was a principal withSchroder Ventures, a private equity investment firmbased in London, England.

Robert B. Rosenbaum has been Vice President,Operations of WESCO since September 1998. From 1982 until 1998, Mr. Rosenbaum was thePresident of the Bruckner Supply Company, Inc., an Integrated Supply company WESCO acquired in September 1998.

Patrick M. Swed has been Vice President, Operationsof WESCO since March 1994. Mr. Swed had beenVice President of Branch Operations for WESCOfrom 1991 to 1994.

Donald H. Thimjon has been Vice President,Operations of WESCO since March 1994. Mr.Thimjon served as Vice President, Utility Group for WESCO from 1991 to 1994 and as RegionalManager from 1980 to 1991.

Ronald P. Van, Jr. has been Vice President,Operations of WESCO since October 1998. Mr. Vanwas a Vice President and Controller of EESCO, anelectrical distributor WESCO acquired in 1996.

Stephen A. Van Oss has been Vice President andChief Financial Officer of WESCO since October2000. Mr. Van Oss served as Director, InformationSystems for WESCO from 1997 to 2000 and asDirector, Acquisition Management in 1997. From1995 to 1996, Mr. Van Oss served as Chief OperatingOfficer and Chief Financial Officer of Paper BackRecycling of America, Inc. From 1979 to 1995, Mr. Van Oss held various management positions with Reliance Electric Corporation.

Daniel A. Brailer has been Treasurer and Director of Investor Relations of WESCO since March 1999.During 1999, Mr. Brailer was also appointed to theposition of Corporate Secretary. From 1982 to 1999, Mr. Brailer held various positions at Mellon FinancialCorporation, most recently as Senior Vice-President.


Item 5. Market for Registrant’sCommon Stock and RelatedStockholder Matters

On May 17, 1999, WESCO completed its initial public offering of common stock (“the Offering”),which is listed on the New York Stock Exchangeunder the symbol “WCC.” As of February 22, 2001,there were 40,158,973 shares of common stock and4,653,131 shares of Class B common stock outstand-ing held by approximately 123 holders of record. No dividends were paid on the common stock, nordoes the Company intend to pay dividends in the foreseeable future. See “Liquidity and CapitalResources.” The following table sets forth the highand low sales price of the shares since the Offering.

Quarter High Low

2000

First 9 71/16

Second 107/8 73/4

Third 101/8 71/2

Fourth 97/8 65/16

1999

Second (from Offering date) 211/4 171/2

Third 227/8 123/8

Fourth 14 1/2 51/2

In connection with the Offering, the Board ofDirectors approved a 57.8 to one stock split effectedin the form of a stock dividend of WESCO’s commonstock. The Board of Directors also reclassified theClass A common stock into common stock, increasedthe authorized common stock to 210,000,000 sharesand the authorized Class B common stock to20,000,000 shares and authorized 20,000,000 sharesof $.01 par value preferred stock, all effective May 11, 1999.

In May 2000, WESCO’s board of directors authorizedan additional $25 million to be added to its existing$25 million share repurchase program which wasauthorized in November 1999. WESCO’s commonstock may be purchased at management’s discretion,subject to certain financial ratios, in open markettransactions and the program may be discontinued at any time. As of February 22, 2001, the Company had purchased approximately 3.9 million shares of its common stock for approximately $32.8 millionpursuant to this program.

part ii


Item 6. Selected Financial Data Year Ended December 31, 2000 1999 9 1998 9 1997 9 1996 9

(Dollars in millions, except share data)

Income Statement Data:Net sales $ 3,881.1 $ 3,423.9 $ 3,025.4 $ 2,594.8 $ 2,274.6

Gross profit 684.1 616.6 537.6 463.9 405.0

Selling, general and administrative expenses 524.3 471.2 415.0 372.5 326.0

Depreciation and amortization 25.0 20.4 14.8 11.3 10.8

Restructuring charge 1 9.4 — — — —

Recapitalization costs 2 — — 51.8 — —

Income from operations 125.4 125.0 56.0 80.1 68.2

Interest expense, net 43.8 47.0 45.1 20.1 17.4

Other expenses 3 24.9 19.5 10.1 — —

Income before income taxes 56.7 58.5 0.8 60.0 50.8

Provision for income taxes 23.3 23.4 8.5 4 23.8 18.3

Income (loss) before extraordinary item 33.4 35.1 (7.7) 36.2 32.5

Extraordinary item, net of applicable taxes 5 — (10.5) — — —

Net income (loss) $ 33.4 $ 24.6 $ (7.7) $ 36.2 $ 32.5

Earnings (loss) per common share 6

Basic before extraordinary item 0.74 0.82 (0.17) 0.61 0.55

Basic 0.74 0.57 (0.17) 0.61 0.55

Diluted before extraordinary item 0.70 0.75 (0.17) 0.55 0.51

Diluted 0.70 0.53 (0.17) 0.55 0.51

Weighted average common shares outstanding6

Basic 45,326,475 43,057,894 45,051,632 59,030,100 58,680,756

Diluted 47,746,607 47,524,539 45,051,632 66,679,063 63,670,919

Other Financial Data:EBITDA before recapitalization

and restructuring charges 7 $ 159.8 $ 145.3 $ 122.6 $ 91.4 $ 79.0

Capital expenditures 21.6 21.2 10.7 11.6 9.3

Net cash provided by (used for) operating activities 46.9 66.4 276.9 (12.0) 15.1

Net cash provided by (used for) investing activities (60.7) (71.9) (184.1) (21.5) (110.9)

Net cash provided by (used for) financing activities 26.0 6.3 (92.3) 41.1 87.2

Balance Sheet Data:Total assets $ 1,170.0 $ 1,028.8 $ 950.5 $ 870.9 $ 773.5

Total long-term debt (including current portion) 483.3 426.4 595.8 295.2 262.2

Redeemable common stock 8 — — 21.5 9.0 8.9

Stockholders’ equity (deficit) 125.0 117.3 (142.6) 184.5 148.71 Represents a restructuring charge taken in the fourth quarter of 2000 as described in Note 4 to the Consolidated Financial Statements.2 Represents a one-time charge primarily related to noncapitalized financing expenses, professional and legal fees and management compensation costs as described inNote 5 to the Consolidated Financial Statements.

3 Represents costs relating to the sale of accounts receivable pursuant to the accounts receivable securitization program as described in Note 6 to the ConsolidatedFinancial Statements.

4 Certain nondeductible recapitalization costs and other permanent differences significantly exceeded income before income taxes and resulted in an unusually high provision for income taxes.

5 Represents a charge, net of tax, relating to the write-off of unamortized debt issuance and other costs associated with the early extinguishment of debt and the 1999 termination of the existing accounts receivable securitization program.

6 Reflects a 57.8 to one stock split effected in the form of a stock dividend of WESCO common stock effective May 11, 1999. 7 EBITDA before recapitalization and restructuring charges represents income from operations plus depreciation, amortization, recapitalization and restructuring costs.EBITDA before recapitalization and restructuring charges is presented since management believes that such information is considered by certain investors to be an additional basis for evaluating the Company’s ability to pay interest and repay debt. EBITDA should not be considered an alternative to measures of operating perform-ance as determined in accordance with generally accepted accounting principles or as a measure of the Company’s operating results and cash flows or as a measure of the Company’s liquidity. Since EBITDA is not calculated identically by all companies, the presentation herein may not be comparable to other similarly titled measuresof other companies.

8 Represents redeemable common stock as described in Note 11 to Consolidated Financial Statements.9 Certain prior period amounts have been reclassified to conform with the current year presentation. Pursuant to Emerging Issues Task Force Issue No. 00-10, Accountingfor Shipping and Handling Fees and Costs, WESCO has reclassified freight billed to customers from selling, general and administrative expenses to net sales.


Item 7. Management’s Discussionand Analysis of Financial Conditionand Results of OperationsThe following discussion should be read in conjunction with theaudited consolidated financial statements and notes thereto includedelsewhere in this Annual Report on Form 10-K.

GENERALWESCO’s sales can be categorized as stock, directship and special order. Stock orders are filled directlyfrom existing inventory and generally represent 40%to 45% of total sales. Approximately 42% to 48% ofWESCO’s total sales are direct ship sales. Direct shipsales are typically custom-built products, large ordersor products that are too bulky to be easily handledand, as a result, are shipped directly to the customerfrom the supplier. Special orders are for products that are not ordinarily stocked in inventory and areordered based on a customer’s specific request.Special orders represent the remainder of total sales.Gross profit margins on stock and special order salesare approximately 50% higher than those on directship sales. Although direct ship gross margins arelower, operating profit margins are often comparable,since the product handling and fulfillment costs associated with direct shipments are much lower.

WESCO has historically financed its acquisitions,new branch openings, working capital needs and capital expenditures through internally generated cash flow and borrowings under its credit facilities.During the initial phase of an acquisition or newbranch opening, WESCO typically incurs expensesrelated to installing or converting information systems,training employees and other initial operating activities.With some acquisitions, WESCO may incur expensesin connection with the closure of any of its ownredundant branches. Historically, the costs associatedwith opening new branches, and closing branches inconnection with certain acquisitions, have not beenmaterial. WESCO has accounted for its acquisitionsunder the purchase method of accounting.

WESCO is a leading consolidator in its industry, having acquired 24 companies since August 1995, representing annual sales of approximately $1.3 bil-lion. Management distinguishes sales attributable to core operations separate from sales of acquiredbusinesses. The distinction between sales from coreoperations and from acquired businesses is based onthe Company’s internal records and on managementestimates where the integration of acquired businessesresults in the closing or consolidation of branches.However, “core operations” typically refer to all inter-nally started branches and all acquired branches thathave been in operation for the entire current and prior

year-to-date periods. “Acquired businesses” generallyrefer to branch operations purchased by WESCO wherethe branches have not been under WESCO ownershipfor the entire current and prior year-to-date periods.

2000 DEVELOPMENTS Developments affecting the 2000 results of operationsand financial position of WESCO include the following:

Restructuring and Special Charges. In the fourthquarter of 2000, WESCO commenced certain programs to reduce costs, improve productivity andexit certain operations. Total costs under these pro-grams were $9.4 million, and were comprised of $5.4 million related to the closure of fourteen branchoperations in the United States, Canada and theBalkans, and $4.0 million related to the write-down of an investment in an affiliate. The $5.4 millioncharge related to the closure of fourteen branch operations is principally comprised of an inventorywrite-down of approximately $4.0 million and leasetermination costs of approximately $1.0 million, the majority of which will be paid in 2001. The $4.0 million investment write-down is a result ofmanagement’s decision to no longer pursue its business strategy with an affiliate.

In addition, WESCO recorded other charges of$11.4 million in the fourth quarter of 2000. The othercharges were comprised of $7.0 million due to thedeteriorating credit environment and customer bank-ruptcy filings and $4.4 million relating to inventorywrite-downs as a result of actions taken to aligninventories with current market conditions. Theseother charges were recorded in selling, general andadministrative expenses and costs of goods sold.

Acquisitions. During 2000, WESCO purchased threeelectrical supply distributors with annual sales ofapproximately $90 million for an aggregate consid-eration of $38.7 million, resulting in goodwill ofapproximately $28.8 million.

Stock Repurchase Program. In May 2000, WESCO’s board of directors authorized an additional$25 million to be added to its existing $25 millionshare repurchase program which was authorized in November 1999. WESCO’s common stock may be purchased at management’s discretion, subject to certain financial ratios, in open market transactionsand the program may be discontinued at any time. As of February 22, 2001, the Company had purchasedapproximately 3.9 million shares of its common stock for approximately $32.8 million pursuant to this program.


RECENT DEVELOPMENTSIn March 2001, WESCO completed its acquisition of all of the outstanding common stock of Herning head-quartered in Hayward, California. Herning, a distributor of gas, lighting and communication utility products, reported net sales of approximately $112 million in 2000. This acquisition will be accounted for under the purchase method of accounting.

RESULTS OF OPERATIONS The following table sets forth the percentage relationship to net sales of certain items in the Company’sConsolidated Statements of Operations for the periods presented:

Year Ended December 31 2000 1999 1998

Net sales 100.0% 100.0% 100.0%

Gross profit 17.6 18.0 17.8

Selling, general and administrative expenses 13.5 13.7 13.7

Depreciation and amortization 0.7 0.6 0.5

Restructuring charge 0.2 — —

Recapitalization costs — — 1.7

Income from operations 3.2 3.7 1.9

Interest expense 1.1 1.4 1.6

Other expenses 0.6 0.6 0.3

Income before income taxes and extraordinary item 1.5 1.7 —

Provision for income taxes 0.6 0.7 0.3

Extraordinary item, net of tax benefits — (0.3) —

Net income (loss) 0.9% 0.7% (0.3)%

2000 COMPARED TO 1999Net Sales. Net sales for the year ended December 31,2000, increased by $457.2 million, or 13.4%, to$3.9 billion compared with $3.4 billion in the prioryear. The increase was due principally to sales gainsattributable to core business operations of almost10%, while the remainder of the increase was pri-marily due to sales of acquired businesses. The mix of direct shipment sales increased to approximately47% in 2000 from 46% in 1999 principally due to sales gains achieved at Bruckner. The majority of Bruckner’s sales are direct shipment.

Gross Profit. Gross profit for the year endedDecember 31, 2000, increased by $67.5 million to$684.1 million from $616.6 million in the prior year.Gross profit margin was 17.6% and 18.0% in 2000and 1999, respectively. Excluding the effect of the other charges related to inventory rationalizationof $4.4 million, gross profit margin decreased to17.7% from 18.0% in the prior year due, in part, to a shift to lower margin direct ship project sales and also due to increased transportation costs.

Selling, General and Administrative Expenses(“SG&A”). SG&A expenses increased $53.0 million,or 11.3%, to $524.3 million. Excluding the impact ofthe other charges of $7.0 million, related primarily tocredit deterioration and bankruptcies, SG&A expensesincreased $46.0 million or 9.8%. This increase wasprimarily due to increased expenses in core business

operations and, to a lesser extent, increased SG&A ofcompanies acquired during 1999 and 2000. Core business SG&A expense increased 6% over 1999, dueprincipally to increased payroll costs. As a percentageof sales, excluding the other charges, SG&A expensesdeclined to 13.3% in 2000 from 13.8% in 1999,reflecting enhanced operating leverage at this higherrelative sales volume.

Depreciation and Amortization. Depreciation andamortization increased $4.6 million to $25.0 million in2000, reflecting higher amortization of goodwill fromacquisitions and depreciation related to increases inproperty, buildings and equipment over the prior year.

Income from Operations. Income from operationsincreased $0.4 million to $125.4 million in 2000,compared with $125.0 million in 1999. Excludingthe restructuring and other charges in 2000, operatingincome increased $21.2 million. This increase wasprimarily due to higher gross profit, partially offset by increased operating costs as explained above.

Interest and Other Expenses. Interest expensetotaled $43.8 million for 2000, a decrease of $3.2 mil-lion from 1999. The decrease was primarily due to thelower level of borrowings since WESCO completedits initial public offering in the second quarter of1999, as well as the increased amount of securitizedaccounts receivable. Other expense totaled $24.9 mil-lion and $19.5 million in 2000 and 1999, respectively,


reflecting costs associated with the accounts receivablesecuritization program. The $5.4 million increase wasprincipally due to the increased level of securitizedaccounts receivable noted above.

Income Taxes. Income tax expense totaled $23.3 mil-lion in 2000, relatively unchanged from 1999. Theeffective tax rates for 2000 and 1999 were 41.0% and39.9%, respectively. The increase in the rate in 2000is principally related to the effect of increased non-deductible expenses on decreased pretax income ascompared to the prior year.

Income Before Extraordinary Item. Income beforeextraordinary item totaled $33.4 million, or $0.70 per diluted share, compared with $35.1 million or$0.75 per diluted share, in 1999. Excluding therestructuring charge of $9.4 million, income beforeextraordinary item was $39.4 million or $0.83 perdiluted share.

Net Income. Net income and diluted earnings pershare totaled $33.4 million and $0.70 per share,respectively, in 2000, compared with $24.6 millionand $0.53 per diluted share, respectively, in 1999. Net income in 1999 included an extraordinary itemwhich decreased net income by $10.5 million.

1999 COMPARED TO 1998 Net Sales. Net sales for the year ended December 31,1999, increased by $398.4 million, or 13.2%, to$3.4 billion compared with $3.0 billion in the prioryear, primarily due to sales attributable to acquiredcompanies. Core business sales increased approxi-mately 4% over 1998. The mix of direct shipmentsales increased to approximately 46% in 1999 from42% in 1998, principally due to the Bruckner acquisi-tion completed in September 1998. Substantially allof Bruckner’s sales are direct shipment.

Gross Profit. Gross profit for the year endedDecember 31, 1999, increased by $79.0 million to$616.6 million from $537.6 million in 1998. Grossprofit margin was 18.0% and 17.8% in 1999 and1998, respectively. Excluding the effects of theBruckner acquisition, which has a higher proportionof lower-margin direct shipment sales, gross profitmargin increased to 18.7% from 18.1% in the prioryear due to gross margin improvement initiatives.

Selling, General and Administrative Expenses.SG&A expenses increased $56.2 million, or 13.6%, to $471.3 million. This increase was substantially due to incremental expenses of companies acquiredduring 1998 and 1999 and, to a lesser extent,increased SG&A in WESCO’s core business. Corebusiness SG&A increased 6% over 1998, due princi-pally to increased payroll costs and, to a lesser extent,

increased transportation costs and bad debt expenses.These increases were partially offset by reductions incertain incentive-based compensation expenses and a reduction in certain discretionary benefits. As a percentage of sales, SG&A expenses remained flatcompared to the prior year.

Depreciation and Amortization. Depreciation andamortization increased $5.5 million to $20.4 million in1999, reflecting higher amortization of goodwill fromacquisitions and depreciation related to increases inproperty, buildings and equipment over the prior year.

Income from Operations. Income from operationsincreased $69.0 million to $125.0 million in 1999,compared with $56.0 million in 1998. Excluding thenonrecurring recapitalization costs in 1998, operatingincome increased $17.2 million. The increase was primarily due to higher gross profit, partially offset by increased operating costs as explained above.

Interest and Other Expenses. Interest expensetotaled $47.0 million for 1999, an increase of$1.8 million over 1998. The increase was primarilydue to the higher levels of borrowings associated withthe Recapitalization and acquisitions, partially offsetby the Offering. Other expenses totaled $19.5 millionand $10.1 million in 1999 and 1998, respectively,reflecting costs associated with the accounts receivablesecuritization program that commenced in June 1998.

Income Taxes. Income tax expense totaled $23.3 mil-lion in 1999 and the effective tax rate was 39.9%. In 1998, income tax expense totaled $8.5 million. In 1998, WESCO recorded charges of $51.8 millionassociated with the Recapitalization that resulted in$0.8 million of income before taxes. Certain nonde-ductible recapitalization costs and other permanentdifferences significantly exceeded the $0.8 million of income before income taxes and resulted in anunusually high effective income tax rate.

Income Before Extraordinary Item. For 1999,income before extraordinary item totaled $35.1 mil-lion, or $0.75 per diluted share, compared with a loss of $7.7 million, or $0.17 per share, in 1998. The increases are primarily due to nonrecurring recap-italization costs incurred in 1998 and to improvedoperating results in 1999.

Net Income (Loss). Net income and diluted earningsper share totaled $24.6 million and $0.53 per share,respectively, in 1999, compared with a loss of$7.7 million, or $0.17 per share, respectively, in 1998.The increase is principally due to the recapitalizationcosts of $51.8 million incurred in 1998 and improvedoperating results in 1999 offset, in part, by the extra-ordinary item of $10.5 million in 1999.


LIQUIDITY AND CAPITAL RESOURCES Total assets were approximately $1.2 billion atDecember 31, 2000, a $141 million increase overDecember 31, 1999. Stockholders’ equity totaled$125.0 million at December 31, 2000, compared with $117.3 million at December 31, 1999.

The following table sets forth WESCO’s outstandingindebtedness:

December 31 2000 1999

(In millions)

Revolving credit facility $ 189.6 $ 132.0

Senior subordinated notes 291.5 290.3

Other 2.2 4.0

483.3 426.3

Less current portion (0.6) (3.8)

$ 482.7 $ 422.5

Initial Public Offering

On May 17, 1999, WESCO completed its initial public offering (the “Offering”) of 11,183,750 sharesof common stock at $18.00 per share. In connectionwith the Offering, certain employee rights to requireWESCO to repurchase outstanding redeemable common stock were terminated and approximately$31.5 million of convertible notes were converted into 1,747,228 shares of common stock. Proceedsfrom the Offering (after deducting Offering costs)totaling $186.8 million and borrowings of approxi-mately $65 million were used to redeem all of the111/8% senior discount notes ($62.8 million) and torepay the revolving credit and term loan facilities($188.8 million).

Revolving Credit Facility

In June 1999, WESCO Distribution entered into a$400 million revolving credit facility with a consor-tium of financial institutions. The revolving creditfacility, which matures in June 2004, consists of up to $365 million of revolving loans denominated inU.S. dollars and a Canadian sublimit totaling $35 mil-lion. Borrowings under the revolving credit facilityare collateralized by substantially all the assets,excluding real property, of WESCO Distribution andare guaranteed by WESCO International, Inc. and certain subsidiaries.

Borrowings bear rates of interest equal to variousindices, at WESCO’s option plus a borrowing margin.At December 31, 2000, the interest rate on the revolving credit facility borrowings was 8.4%. A com-mitment fee of 30 to 50 basis points per year is dueon unused portions of the revolving credit facility.

WESCO’s credit agreements contain various restrictivecovenants that, among other things, impose limitationson (i) dividend payments or certain other restrictedpayments or investments; (ii) the incurrence of addi-tional indebtedness and guarantees or issuance ofadditional stock; (iii) creation of liens; (iv) mergers,consolidation or sales of substantially all of WESCO’sassets; (v) certain transactions among affiliates; (vi) payments by certain subsidiaries to WESCO; and (vii) capital expenditures. In addition, the agree-ments require WESCO to meet certain leverage,working capital and interest coverage ratios. WESCOwas in compliance with all such covenants atDecember 31, 2000.

In December 2000, WESCO amended its revolvingcredit facility, which provided additional operatingflexibility and increased the maximum amount allow-able under the accounts receivable securitizationprogram to $475 million from $375 million and alsoamended certain financial covenants. Receivables soldunder the accounts receivable securitization programin excess of $375 million will permanently reduce theamount available under the revolving credit facility ona dollar for dollar basis. In February 2001, WESCOincreased the amount of receivables sold under thesecuritization to $396 million from $375 million. Thissimultaneously decreased the amount available underthe revolving credit agreement to $379 million.

WESCO’s liquidity needs arise from seasonal workingcapital requirements, capital expenditures, debt serviceobligations and acquisitions. As of December 31,2000, required annual principal repayments for thenext five years are as follows:

(In thousands)

2001 $ 585

2002 1,530

2003 30

2004 189,654

2005 30

Accounts Receivable Securitization Program

WESCO maintains a $375 million accounts receivablesecuritization program (“Receivables Facility”) with a financial institution. Under the Receivables Facility,WESCO sells, on a continuous basis, to WESCOReceivables Corporation, a wholly-owned special purpose company (“SPC”), an undivided interest in all eligible accounts receivable. WESCO has agreedto continue servicing the sold receivables for thefinancial institution at market rates; accordingly, noservicing asset or liability has been recorded.


An analysis of cash flows for 2000 and 1999 follows:

Operating Activities. Cash provided by operatingactivities totaled $46.9 million for the year endedDecember 31, 2000, compared to $66.4 million a yearago. Cash provided by operations in 2000 and 1999included proceeds of $40.0 million and $60.0 million,respectively, from the sale of accounts receivable inconnection with the accounts receivable securitizationprogram. Excluding these proceeds, operating activi-ties provided $6.9 million in 2000 and $6.4 million in1999. On this basis, the year-to-year increase in oper-ating cash flow of $0.5 million was primarily due toincreased income adjusted for non-cash charges, partially offset by an increase in working capital.

Investing Activities. Net cash used in investing activitieswas $60.7 million in 2000, compared to $71.9 millionin 1999. Cash used for investing activities was higherin 1999 primarily due to amounts invested in businessacquisitions. Capital expenditures in 2000 were$21.6 million compared to $21.2 million in 1999 andwere for computer equipment and software, branch and distribution center facility improvements, forklifts and delivery vehicles. Capital expenditures for 2001are not expected to differ significantly from 2000.

Financing Activities. Cash provided by financingactivities was $26.0 million in 2000 which wasprimarily due to net borrowings of $53.3 million, partially offset by the Company’s treasury stock purchase program. Cash provided by financing acti-vities in 1999 totaled $6.3 million and was primarilydue to the Offering, partially offset by a reduction in long-term debt and treasury stock purchases.

For the year ended December 31, 2000, WESCO purchased approximately 3.3 million shares of itscommon stock for approximately $28.1 million.

Management believes that cash generated from operations, together with amounts available under thecredit agreement and the receivables facility, will besufficient to meet WESCO’s working capital, capitalexpenditures and other cash requirements for the foreseeable future. There can be no assurance, however,that this will be the case. Financing of acquisitionscan be funded under the existing credit agreement and may, depending on the number and size of theacquisitions, require the issuance of additional debtand equity securities.

INFLATION The rate of inflation, as measured by changes in theconsumer price index, did not have a material effecton the sales or operating results of the Company during the periods presented. However, inflation in the future could affect the Company’s operating costs.

Price changes from suppliers have historically beenconsistent with inflation and have not had a materialimpact on the Company’s results of operations.

SEASONALITY The Company’s operating results are affected by certain seasonal factors. Sales are typically at theirlowest during the first quarter due to a reduced levelof activity during the winter months. Sales increaseduring the warmer months beginning in March andcontinuing through November. Sales drop againslightly in December as the weather cools and also as a result of a reduced level of activity during theholiday season. As a result, the Company reports sales and earnings in the first quarter that are generallylower than that of the remaining quarters.

IMPACT OF RECENTLY ISSUEDACCOUNTING STANDARDS In June 1998, the Financial Accounting StandardsBoard (“FASB”) issued SFAS No. 133, “Accountingfor Derivative Instruments and Hedging Activities.”This statement, as amended by SFAS No. 138, wasadopted by WESCO on January 1, 2001. This state-ment requires the recognition of the fair value of anyderivative financial instrument on the balance sheet.Changes in fair value of the derivative and, in certaininstances, changes in the fair value of an underlyinghedged asset or liability, are recognized through eitherincome or as a component of other comprehensiveincome. The adoption of this statement did not have amaterial impact on the results of operations or finan-cial position of WESCO.

In December 1999, the staff of the Securities andExchange Commission (SEC) issued Staff AccountingBulletin (SAB) No. 101, “Revenue Recognition inFinancial Statements.” SAB No. 101 outlines thebasic criteria that must be met to recognize revenue,and provides guidelines for disclosure related to rev-enue recognition policies. The application of thisguidance did not have a material impact on WESCO’sconsolidated financial statements in 2000.

In September 2000, the FASB issued SFAS No. 140, a modification of SFAS No. 125. SFAS No. 140 is effective for transfers after March 31, 2001 and iseffective for disclosures about securitizations and collateral and for recognition and reclassification ofcollateral for fiscal years ending after December 15,2000. The disclosure provisions of this statement have been adopted. The adoption of this statement forfuture transfers is not expected to have a materialimpact on the results of operations or financial posi-tion of WESCO.


Item 7A. Quantitative and Qualitative Disclosures About Market Risks

FOREIGN CURRENCY RISKSOver 90% of WESCO’s sales are denominated in United States dollars and are primarily from customers in the United States. As a result, currency fluctuations are currently not material to WESCO’s operating results.WESCO does have foreign subsidiaries located in North America, Europe and Asia and may establish additionalforeign subsidiaries in the future. Accordingly, WESCO may derive a more significant portion of its sales frominternational operations and a portion of these sales may be denominated in foreign currencies. As a result,WESCO’s future operating results could become subject to fluctuations in the exchange rates of those currenciesin relation to the United States dollar. Furthermore, to the extent that WESCO engages in international salesdenominated in United States dollars, an increase in the value of the United States dollar relative to foreign currencies could make WESCO’s products less competitive in international markets. WESCO has and will continue to monitor its exposure to currency fluctuations.

INTEREST RATE RISKSWESCO’s indebtedness as of December 31, 2000 is comprised of $189.6 million of variable-rate borrowings outstanding under its revolving credit facility and $293.7 million of fixed-rate borrowings. Interest cost under the revolving credit facility is based on various indices plus a borrowing margin. WESCO uses interest rate cap agreements to hedge a portion of its debt cost in an attempt to strike a favorable balance between fixed and variable rate. The interest rate cap agreements effectively cap WESCO’s base LIBOR rate at 7.25% for$100.0 million of borrowings through May 2001 and at 7.0% for $25.0 million of borrowings through August2001. The interest rate cap agreements did not have a material impact on the Company’s consolidated financialstatements for the year ended December 31, 2000. The interest rate on WESCO’s revolving credit agreement was8.4% at December 31, 2000. A hypothetical 10% change in this interest rate based on variable-rate borrowinglevels as of December 31, 2000 and including the impact of the interest rate caps would result in a $1.6 millionincrease or decrease in interest expense.

Item 8. Financial Statements

The information required by this item is set forth in the Company’s Consolidated Financial Statements and sup-plementary data contained in this Annual Report on Form 10-K and is incorporated herein by reference. Specificfinancial statements and supplementary data can be found at the pages listed below:

WESCO International, Inc. Page

Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Consolidated Balance Sheets as of December 31, 2000 and 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998 . . . . . . . . . . . . . . . 39

Consolidated Statements of Stockholders’ Equity and Redeemable Common Stock for the years ended December 31, 2000, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998 . . . . . . . . . . . . . . 41

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

None.


Items 10 through 13.

In accordance with the provisions of GeneralInstruction G to Form 10-K, the information requiredby Item 10 (Directors and Executive Officers of theRegistrant), Item 11 (Executive Compensation), Item12 (Security Ownership of Certain Beneficial Ownersand Management) and Item 13 (Certain Relationshipsand Related Transactions) is incorporated herein by reference to the Company’s definitive ProxyStatement for its Annual Meeting of Stockholders to be held on May 23, 2001. The definitive ProxyStatement will be filed with the Securities andExchange Commission not later than 120 days afterDecember 31, 2000. Information relating to the exec-utive officers of the Company is set forth in Part I.

part iii


Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

The financial statements, financial statement schedules and exhibits listed below are filed as part of this annual report:

(a)(1) Financial Statements

The list of financial statements required by this item is set forth in Item 8 “Financial Statements andSupplementary Data” and is incorporated herein by reference.

(2) Financial Statement Schedules

Report of Independent AccountantsSchedule II – Valuation and Qualifying Accounts

(b) Reports On Form 8-K

None

(c) Exhibits

Exhibit No. Description Of Exhibit Prior Filing Or Sequential Page Number

2.1 Recapitalization Agreement dated as of Incorporated by reference to WESCO’s Exhibit 2.1March 27, 1998 among Thor Acquisitions to the Registration Statement on Form S-4 (No. 333-43225) L.L.C., WESCO International, Inc. (formerly (the “Form S-4”)known as CDW Holding Corporation,“WESCO”)and certain securityholders of WESCO.

2.2 Purchase Agreement dated May 29, 1998 Incorporated by reference to Exhibit 2.2 to the Form S-4among WESCO, WESCO Distribution, Inc. (“WESCO Distribution”), Chase Securities Inc. and Lehman Brothers Inc.

2.3 Asset Purchase Agreement among Bruckner Incorporated by reference to Exhibit 2.01 to the CurrentSupply Company, Inc. and WESCO Report on Form 8-K dated September 11, 1998Distribution dated September 11, 1998, previously filed.

3.1 Amended and Restated Certificate of Incorporated by reference to Exhibit 3.2 to the Form S-1Incorporation of WESCO. (No. 333-73299) (the “Form S-1”)

3.2 By-Laws of WESCO. Incorporated by reference to Exhibit 3.3 to the Registration Statement on Form S-1

4.1 Indenture dated as of June 5, 1998 among Incorporated by reference to Exhibit 4.1 to the Form S-4WESCO, WESCO Distribution and Bank One, N.A.

4.2 Form of 91/8% Senior Subordinated Note Incorporated by reference to Exhibit 4.2 to the Form S-4Due 2008, Series A (included in Exhibit 4.3).

4.3 Form of 91/8% Senior Subordinated Note Incorporated by reference to Exhibit 4.3 to the Form S-4Due 2008, Series B (included in Exhibit 4.3).

4.4 Exchange and Registration Rights Agreement Incorporated by reference to Exhibit 4.4 to the Form S-4dated as of June 5, 1998 among the Company,WESCO and The Initial Purchasers.

4.8 Exchange and Registration Rights Agreement Incorporated by reference to Exhibit 4.8 to the Form S-4dated as of June 5, 1998 among WESCO and the Initial Purchasers.

10.1 CDW Holding Corporation Stock Purchase Plan. Incorporated by reference to Exhibit 10.1 to the Form S-4

10.2 Form of Stock Subscription Agreement. Incorporated by reference to Exhibit 10.2 to the Form S-4

10.3 CDW Holding Corporation Stock Option Plan. Incorporated by reference to Exhibit 10.3 to the Form S-4

10.4 Form of Stock Option Agreement. Incorporated by reference to Exhibit 10.4 to the Form S-4

10.5 CDW Holding Corporation Stock Option Incorporated by reference to Exhibit 10.5 to the Form S-4Plan for Branch Employees.

10.6 Form of Branch Stock Option Agreement. Incorporated by reference to Exhibit 10.6 to the Form S-4

10.7 Non-Competition Agreement, dated as of Incorporated by reference to Exhibit 10.8 to the Form S-4February 28, 1996, between Westinghouse, WESCO and WESCO Distribution.

part iv


10.8 Lease dated May 24, 1995 as amended by Incorporated by reference to Exhibit 10.10 to the Form S-4Amendment One dated June 1995 and by Amendment Two dated December 24, 1995 by and between WESCO Distribution as Tenant and Opal Investors, L.P. and Mural GEM Investors as Landlord.

10.9 Lease dated April 1, 1992 as renewed by Incorporated by reference to Exhibit 10.11 to the Form S-4Letter of Notice of Intent to Renew dated December 13, 1996 by and between the Company successor in interest to WestinghouseElectric Corporation as Tenant and Utah State Retirement Fund as Landlord.

10.10 Lease dated September 4, 1997 between Incorporated by reference to Exhibit 10.12 to the Form S-4WESCO Distribution as Tenant and The Buncher Company as Landlord.

10.11 Lease dated March 1995 by and between Incorporated by reference to Exhibit 10.13 to the Form S-4WESCO Distribution-Canada, Inc. (“WESCO Canada”) as Tenant and Atlantic Construction, Inc. as Landlord.

10.18 Amended and Restated Registration and Incorporated by reference to Exhibit 10.19 to the Form S-4Participation Agreement dated June 5, 1998 among WESCO and certain securityholders of WESCO named therein.

10.19 Employment Agreement between WESCO Incorporated by reference to Exhibit 10.20 to the Form S-4Distribution and Roy W. Haley.

10.20 WESCO International, Inc. 1998 Incorporated by reference to WESCO’s Exhibit 10.1Stock Option Plan. to Quarterly Report on Form 10-Q for the quarter ended

September 30, 1998

10.21 Form of Management Stock Incorporated by reference to WESCO’s Exhibit 10.1 toOption Agreement. Quarterly Report on Form 10-Q for the quarter ended

September 30, 1998

10.22 1999 Deferred Compensation Plan for Incorporated by reference to WESCO’s Exhibit 10.22Non-Employee Directors. to Annual Report on Form 10-K for the year ended

December 31, 1998

10.23 Credit Agreement among WESCO Distribution, Incorporated by reference to WESCO’s Exhibit 10.1 Inc., WESCO Distribution-Canada, Inc., to Quarterly Report on Form 10-Q for the period ended WESCO International, Inc. and the Lenders June 30, 1999 (the “Second Quarter Form 10-Q”)identified therein, dated June 29, 1999.

10.24 Amendment, dated December 20, 2000, to Filed herewiththe Credit Agreement among WESCODistribution, Inc., WESCO Distribution-Canada, Inc. WESCO International, Inc. and the Lenders identified therein, dated June 29, 1999.

10.25 Receivables Purchase Agreement dated Incorporated by reference to Exhibit 10.2 to the Second as of June 30, 1999, among WESCO Quarter Form 10-QReceivables Corp., WESCO Distribution, Inc., Market Street Capital Corp. and PNC Bank, National Association.

10.26 Amended and Restated Receivables Purchase Incorporated by reference to WESCO’s Exhibit 10.1 to Agreement, dated as of September 28, 1999, Quarterly Report on Form 10-Q for the period ended among WESCO Receivables Corp., September 30, 1999WESCO Distribution, Inc., and PNC Bank, National Association.

10.27 1999 Long-Term Incentive Plan. Incorporated by reference to WESCO’s Exhibit 10.22 to Form S-1

21.1 Subsidiaries of WESCO. Incorporated by reference to Exhibit 21.1 to the Registration Statement on Form S-1

23.1 Consent of PricewaterhouseCoopers LLP, Filed herewithIndependent Accountants.

The registrant hereby agrees to furnish supplementally to the Commission, upon request, a copy of any omittedschedule to any of the agreements contained herein.

Copies of exhibits may be retrieved electronically at the Securities and Exchange Commission’s home page at www.sec.gov. Exhibits will also be furnished without charge by writing to Stephen A. Van Oss, Vice President,Chief Financial Officer, Commerce Court, Four Station Square, Suite 700, Pittsburgh, Pennsylvania 15219.Requests may also be directed to (412) 454-2200.


SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WESCO INTERNATIONAL, INC.

By: /s/ ROY W. HALEYName: Roy W. Haley Title: Chairman of the Board and Chief Executive OfficerDate: April 2, 2001

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ ROY W. HALEY Chairman and Chief Executive Officer Roy W. Haley (Principal Executive Officer) April 2, 2001

/s/ STEPHEN A. VAN OSS Vice President, Chief Financial Officer Stephen A. Van Oss (Principal Financial and Accounting Officer) April 2, 2001

/s/ JAMES L. SINGLETON Director April 2, 2001James L. Singleton

/s/ JAMES A. STERN Director April 2, 2001James A. Stern

/s/ ANTHONY D. TUTRONE Director April 2, 2001Anthony D. Tutrone

/s/ MICHAEL J. CHESHIRE Director April 2, 2001Michael J. Cheshire

/s/ ROBERT J. TARR, JR. Director April 2, 2001Robert J. Tarr, Jr.

/s/ KENNETH L. WAY Director April 2, 2001Kenneth L. Way

/s/ GEORGE L. MILES, JR. Director April 2, 2001George L. Miles, Jr.


INDEX TO CONSOLIDATED FINANCIAL STATEMENTSPage

Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Consolidated Balance Sheets as of December 31, 2000 and 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998 . . . . . . . . . . . . . . . 39

Consolidated Statements of Stockholders’ Equity and Redeemable Common Stockfor the years ended December 31, 2000, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998 . . . . . . . . . . . . . . 41

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42


REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of WESCO International, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations,stockholders’ equity and redeemable common stock and cash flows present fairly, in all material respects, thefinancial position of WESCO International, Inc. and its subsidiaries at December 31, 2000 and 1999, and the resultsof their operations and their cash flows for each of the three years in the period ended December 31, 2000 in con-formity with accounting principles generally accepted in the United States of America. These financial statementsare the responsibility of the Company’s management; our responsibility is to express an opinion on these financialstatements based on our audits. We conducted our audits of these statements in accordance with auditing standardsgenerally accepted in the United States of America, which require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessingthe accounting principles used and significant estimates made by management, and evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP600 Grant Street Pittsburgh, Pennsylvania February 9, 2001


Consolidated Balance SheetsWESCO International, Inc. and Subsidiaries

December 31 2000 1999

(Dollars in thousands, except share data)

ASSETS

Current Assets:Cash and cash equivalents $ 21,079 $ 8,819

Trade accounts receivable, net of allowance for doubtful accounts of $9,794 and $7,023 in 2000 and 1999, respectively (Note 6) 259,988 188,307

Other accounts receivable 31,365 31,829

Inventories 421,083 397,669

Income taxes receivable 10,951 10,667

Prepaid expenses and other current assets 5,602 4,930

Deferred income taxes (Note 12) 14,157 11,580

Total current assets 764,225 653,801

Property, buildings and equipment, net (Note 9) 123,477 116,638

Goodwill and other intangibles, net of accumulated amortization of $29,053 and $18,956 in 2000 and 1999, respectively (Note 7) 277,763 249,240

Other assets 4,568 9,114

Total assets $ 1,170,033 $1,028,793

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:Accounts payable $ 460,535 $ 406,963

Accrued payroll and benefit costs 27,027 18,171

Current portion of long-term debt 585 3,831

Other current liabilities 35,695 25,820

Total current liabilities 523,842 454,785

Long-term debt (Note 10) 482,740 422,539

Other noncurrent liabilities 6,823 7,504

Deferred income taxes (Note 12) 31,641 26,660

Total liabilities 1,045,046 911,488

Commitments and contingencies (Note 16)

STOCKHOLDERS’ EQUITY (NOTES 3 AND 11):

Preferred stock, $.01 par value; 20,000,000 shares authorized, no shares issued or outstanding — —

Common stock, $.01 par value; 210,000,000 shares authorized, 44,093,664 and 43,291,319 shares issued in 2000 and 1999, respectively 441 433

Class B nonvoting convertible common stock, $.01 par value; 20,000,000 shares authorized, 4,653,131 issued in 2000 and 1999 46 46

Additional capital 569,288 565,897

Retained earnings (deficit) (410,144) (443,582)

Treasury stock, at cost; 3,976,897 and 637,259 shares in 2000 and 1999, respectively (33,406) (4,790)

Accumulated other comprehensive income (loss) (1,238) (699)

Total stockholders’ equity 124,987 117,305

Total liabilities and stockholders’ equity $ 1,170,033 $1,028,793

The accompanying notes are an integral part of the consolidated financial statements.


Consolidated Statements of OperationsWESCO International, Inc. and Subsidiaries


(In thousands, except share data)

Net sales $ 3,881,096 $ 3,423,858 $ 3,025,439

Cost of goods sold 3,196,952 2,807,240 2,487,780

Gross profit 684,144 616,618 537,659

Selling, general and administrative expenses 524,309 471,275 415,028

Depreciation and amortization 24,993 20,350 14,805

Restructuring charge (Note 4) 9,404 — —

Recapitalization costs (Note 5) — — 51,800

Income from operations 125,438 124,993 56,026

Interest expense, net 43,780 46,968 45,121

Other expenses (Note 6) 24,945 19,547 10,122

Income before income taxes and extraordinary item 56,713 58,478 783

Provision for income taxes (Note 12) 23,275 23,333 8,519

Income (loss) before extraordinary item 33,438 35,145 (7,736)

Extraordinary item, net of tax benefit of $6,711 (Note 10) — (10,507) —

Net income (loss) $ 33,438 $ 24,638 $ (7,736)

Earnings (loss) per share (Note 13)

Basic:

Income (loss) before extraordinary item $ 0.74 $ 0.82 $ (0.17)

Extraordinary item — (0.25) —

Net income (loss) $ 0.74 $ 0.57 $ (0.17)

Diluted:

Income (loss) before extraordinary item $ 0.70 $ 0.75 $ (0.17)

Extraordinary item — (0.22) —

Net income (loss) $ 0.70 $ 0.53 $ (0.17)



Consolidated Statements of Stockholders’ Equityand Redeemable Common StockWESCO International, Inc. and Subsidiaries

Common AccumulatedStock to Other

Class B Retained be Issued Comprehensive RedeemableComprehensive Common Common Additional Earnings Under Treasury Income Common

Income Stock Stock Capital (Deficit) Option Stock (Loss) Stock

(In thousands)

Balance,December 31, 1997 $ 539 $ — $ 92,789 $ 89,366 $ 2,500 $ — $ (659) $ 8,978

Recapitalization, net (287) 46 231,326 (549,143) (2,500) 1,271

Issuance of common stock 16,759

Repurchase of common stock (707) (1,427)

Exercise of stock options, including tax benefit 888

Forfeiture and repurchase of stock options 1,780 (4,075)

Net loss $ (7,736) (7,736)

Translation adjustment (763) (763)

Comprehensive income $ (8,499)

Balance, December 31, 1998 252 46 326,783 (468,220) — — (1,422) 21,506

Issuance of common stock 112 186,662

Termination of redemption rights 49 21,457 (21,506)

Conversion of convertible notes 17 29,574

Repurchase of common stock (4,756)

Exercise of stock options, including tax benefit 3 1,421 (34)

Net income $ 24,638 24,638

Translation adjustment 723 723

Comprehensive income $ 25,361

Balance, December 31, 1999 433 46 565,897 (443,582) — (4,790) (699) —

Repurchase of common stock (28,064)

Exercise of stock options, including tax benefit 8 3,391 (552)

Net income $ 33,438 33,438

Translation adjustment (539) (539)

Comprehensive income $ 32,899

Balance, December 31, 2000 $ 441 $ 46 $ 569,288 $(410,144) $ — $(33,406) $ (1,238) $ —



Consolidated Statements of Cash FlowsWESCO International, Inc. and Subsidiaries


(In thousands)

Operating Activities:Net income (loss) $ 33,438 $ 24,638 $ (7,736)

Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:

Restructuring charge 9,404 — —

Extraordinary item, net of tax benefits — 10,507 —

Recapitalization costs — — 40,500

Depreciation and amortization 24,993 20,350 14,805

Accretion of original issue and amortization of purchase discounts 1,147 4,441 6,300

Amortization of debt issuance and interest rate cap costs 608 1,153 1,276

(Gain) loss on sale of property, buildings and equipment (841) 314 (1,404)

Deferred income taxes 2,760 13,718 2,370

Changes in assets and liabilities, excluding the effects of acquisitions:

Sale of trade accounts receivable 40,000 60,000 274,245

Trade and other receivables (97,570) (66,725) (23,644)

Inventories (16,047) (44,964) (5,645)

Prepaid expenses and other current assets 151 2,553 (2,151)

Other assets (99) 417 191

Accounts payable 39,345 41,788 (8,445)

Accrued payroll and benefit costs 8,488 (1,443) (8,380)

Other current and noncurrent liabilities 1,134 (391) (5,428)

Net cash provided by operating activities 46,911 66,356 276,854

Investing Activities:Capital expenditures (21,552) (21,230) (10,694)

Proceeds from the sale of property, buildings and equipment 1,543 650 2,039

Receipts from (advances to) affiliate 224 8,667 (1,461)

Acquisitions, net of cash acquired (40,904) (59,983) (173,976)

Net cash used by investing activities (60,689) (71,896) (184,092)

Financing Activities:Proceeds from issuance of long-term debt 724,038 683,772 1,064,288

Repayments of long-term debt (670,734) (858,072) (797,555)

Debt issuance costs (475) (2,160) (10,693)

Proceeds from issuance of common stock, net of offering

costs, and exercise of options 1,273 187,482 332,795

Repurchase of common stock (28,064) (4,756) (657,956)

Recapitalization costs — — (28,974)

Proceeds from contributed capital — — 5,806

Net cash provided (used) by financing activities 26,038 6,266 (92,289)

Net change in cash and cash equivalents 12,260 726 473

Cash and cash equivalents at the beginning of period 8,819 8,093 7,620

Cash and cash equivalents at the end of period $ 21,079 $ 8,819 $ 8,093



1. ORGANIZATION WESCO International, Inc. and its subsidiaries (collectively, “WESCO”), headquartered in Pittsburgh,Pennsylvania, is a full-line distributor of electricalsupplies and equipment and is a provider of integratedsupply procurement services. WESCO currently oper-ates over 350 branch locations and five distributioncenters in the United States, Canada, Mexico, PuertoRico, Guam, the United Kingdom and Singapore.

2. ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include theaccounts of WESCO International, Inc. and allof its subsidiaries. All significant intercompanyaccounts and transactions have been eliminated in consolidation.

The preparation of the consolidated financial statements in conformity with generally acceptedaccounting principles requires management to makecertain estimates and assumptions. These may affectthe reported amounts of assets and liabilities and thedisclosure of contingent assets and liabilities at thedate of the consolidated financial statements. Theymay also affect the reported amounts of revenues andexpenses during the reported period. Actual resultscould differ from these estimates upon subsequentresolution of some matters.

Revenue Recognition

Revenues are recognized when title, ownership and riskof loss pass to the customer, or services are rendered.

Shipping and Handling Costs and Fees

WESCO records all costs and fees associated withtransporting its products to customers as a componentof selling, general and administrative expenses.

Cash Equivalents

Cash equivalents are defined as highly liquid invest-ments with original maturities of 90 days or less when purchased.

Asset Securitization

WESCO accounts for the securitization of accountsreceivable in accordance with Statement of FinancialAccounting Standards (“SFAS”) No. 125, “Accountingfor Transfers and Servicing of Financial Assets andExtinguishments of Liabilities,” as amended by SFASNo. 140. At the time the receivables are sold the

balances are removed from the balance sheet. SFASNo. 125 also requires retained interests in the trans-ferred assets to be measured by allocating the previouscarrying amount between the assets sold and retainedinterests based on their relative fair values at the dateof transfer. The Company estimates fair value based on the present value of expected future cash flows dis-counted at a rate commensurate with the risks involved.

Inventories

Inventories primarily consist of merchandise purchasedfor resale and are stated at the lower of cost or market.Cost is determined principally under the average cost method.

Property, Buildings and Equipment

Property, buildings and equipment are recorded atcost. Depreciation expense is determined using thestraight-line method over the estimated useful lives ofthe assets. Leasehold improvements are amortizedover either their respective lease terms or their esti-mated lives, whichever is shorter. Estimated usefullives range from five to forty years for buildings andleasehold improvements, three to seven years for fur-niture, fixtures and equipment and two to five yearsfor software costs.

Expenditures for new facilities and improvements that extend the useful life of an asset are capitalized.Ordinary repairs and maintenance are expensed as incurred. When property is retired or otherwise disposed of, the cost and the related accumulateddepreciation are removed from the accounts and anyrelated gains or losses are recorded.

Intangible Assets

Goodwill arising from acquisitions and other intangible assets are amortized on a straight-line basis over periods ranging from 25 to 35 years. The carrying values of individual components ofintangible assets are regularly reviewed by evaluatingthe estimated future undiscounted cash flows to determine recoverability of the assets. Any decrease in value is recognized on a current basis.

Income Taxes

Income taxes are accounted for under the liabilitymethod. Deferred tax assets and liabilities are deter-mined based on differences between the financialreporting and tax basis of assets and liabilities and aremeasured using the enacted tax rates and laws thatwill be in effect when the differences are expected toreverse. Valuation allowances, if any, are providedwhen a portion or all of a deferred tax asset may notbe realized.

notes to consolidated financial statements


Foreign Currency Translation

The local currency is the functional currency for all of WESCO’s operations outside the United States.Assets and liabilities of these operations are translatedto U.S. dollars at the exchange rate in effect at the endof each period. Income statement accounts are trans-lated at the average exchange rate prevailing duringthe period. Translation adjustments arising from theuse of differing exchange rates from period to periodare included as a component of stockholders’ equity.Gains and losses from foreign currency transactionsare included in net income for the period.

Treasury Stock

Common stock purchased for treasury is recorded atcost. At the date of subsequent reissue, the treasurystock account is reduced by the cost of such stock onthe weighted average cost basis.

Financial Instruments

WESCO’s current financial instruments include cash and cash equivalents, accounts receivable andaccounts payable. Due to their short-term nature, car-rying value approximates fair value for these financialinstruments. The fair value of WESCO’s long-termdebt approximates its carrying value at December 31,2000, with the exception of the senior subordinatednotes. At December 31, 2000, the carrying amount of the senior subordinated notes was $291.5 millioncompared to an approximate fair value based on quoted market prices of $264.0 million.

Additionally, WESCO periodically enters into interestrate cap, floor and collar agreements to mitigate theexposure that changes in interest rates have on vari-able-rate borrowings. If the requirements for hedgeaccounting are met, amounts paid or received underthese agreements are recognized over the life of theagreements as adjustments to interest expense.Otherwise, the instruments are marked to market andthe gains and losses from changes in the market valueof the contracts are recorded in the current period.The market value of the interest rate caps in effect atDecember 31, 2000 approximated the carrying value.These agreements did not have a material impact onWESCO’s consolidated financial statements for any of the three years ended December 31, 2000.

Environmental Expenditures

WESCO has facilities and operations which distributecertain products that must comply with environmentalregulations and laws. Expenditures for current opera-tions are expensed or capitalized, as appropriate.

Expenditures relating to existing conditions caused bypast operations, and which do not contribute to futurerevenue, are expensed. Liabilities are recorded whenremedial efforts are probable and the costs can be rea-sonably estimated.

Reclassifications

Certain prior period amounts have been reclassified toconform with the current year presentation. Pursuantto Emerging Issues Task Force Issue (“EITF”) No.00-10, “Accounting for Shipping and Handling Feesand Costs,” WESCO has reclassified freight billed tocustomers from selling, general and administrativeexpenses to net sales for all periods presented.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting StandardsBoard (“FASB”) issued SFAS No. 133, “Accountingfor Derivative Instruments and Hedging Activities.”This statement, as amended by SFAS No. 138, wasadopted by WESCO on January 1, 2001. This state-ment requires the recognition of the fair value of anyderivative financial instrument on the balance sheet.Changes in fair value of the derivative and, in certaininstances, changes in the fair value of an underlyinghedged asset or liability, are recognized through eitherincome or as a component of other comprehensiveincome. The adoption of this statement did not have amaterial impact on the results of operations or finan-cial position of WESCO.

In December 1999, the staff of the Securities andExchange Commission (SEC) issued Staff AccountingBulletin (SAB) No. 101, “Revenue Recognition inFinancial Statements.” SAB No. 101 outlines thebasic criteria that must be met to recognize revenue,and provides guidelines for disclosure related to rev-enue recognition policies. The application of thisguidance did not have a material impact on WESCO’sconsolidated financial statements in 2000.

In September 2000, the FASB issued SFAS No. 140, a modification of SFAS No. 125. SFAS No. 140 is effective for transfers after March 31, 2001 and is effective for disclosures about securitizations and collateral and for recognition and reclassifi-cation of collateral for fiscal years ending after December 15, 2000. The disclosure provisions of thisstatement have been adopted. The adoption of thisstatement for future transfers is not expected to have a material impact on the results of operations or financial position of WESCO.


3. INITIAL PUBLIC OFFERINGOn May 17, 1999, WESCO completed its initial public offering of 11,183,750 shares of common stock (“Offering”) at $18.00 per share. In connectionwith the Offering, certain employee rights to requireWESCO to repurchase outstanding redeemable common stock were terminated and approximately$31.5 million of convertible notes were converted into 1,747,228 shares of common stock. Proceedsfrom the Offering (after deducting Offering costs of$14.5 million) totaling $186.8 million and borrowingsof approximately $65 million were used to redeem allof the 111/8% senior discount notes ($62.8 million)and to repay the existing revolving credit and termloan facilities ($188.8 million).

In connection with the Offering, the Board ofDirectors approved a 57.8 to one stock split effectedin the form of a stock dividend of WESCO’s commonstock. The Board of Directors also reclassified theClass A common stock into common stock, increasedthe authorized common stock to 210,000,000 sharesand the authorized Class B common stock to20,000,000 shares and authorized 20,000,000 sharesof $.01 par value preferred stock, all effective May11, 1999. In this report, all share and per share datahave been restated to reflect the stock split.

4. RESTRUCTURING CHARGEIn the fourth quarter of 2000, WESCO commencedcertain programs to reduce costs, improve product-ivity and exit certain operations. Total costs underthese programs were $9.4 million, and were com-prised of $5.4 million related to the closure of fourteenbranch operations in the United States, Canada and theBalkans, and $4.0 million related to the write-down ofan investment in an affiliate. The $5.4 million chargerelated to the closure of fourteen branch operations isprincipally comprised of an inventory write-down ofapproximately $4.0 million and lease termination costsof approximately $1.0 million, the majority of whichwill be paid in 2001. The $4.0 million investmentwrite-down is a result of management’s decision to nolonger pursue its business strategy with an affiliate.

5. RECAPITALIZATIONOn June 5, 1998, WESCO repurchased and retired all of the common stock of WESCO held by Clayton,Dubilier & Rice (“CD&R”) (48,163,584 shares), the former Westinghouse Electric Corporation(“Westinghouse”) (11,560,000 shares), and certainother management and nonmanagement stockholders(2,138,484 shares). All shares were issued and repurchased at $10.75 per share for net consider-ation of approximately $653.5 million (“EquityConsideration”). In addition, WESCO repaid

approximately $379.1 million of then outstandingindebtedness, and sold 29,604,351 shares of commonstock to an investor group led by affiliates of theCypress Group LLC (“Cypress”) representing approximately 88.7% of WESCO at that time for an aggregate cash consideration of $318.1 million (“Cash Equity Contribution”) (collectively,“Recapitalization”). Existing management retainedapproximately an 11.3% interest in WESCO immedi-ately following the Recapitalization. WESCO fundedthe Equity Consideration and the repayment of indebtedness from proceeds of the Cash EquityContribution, issuance of approximately $351 millionof senior subordinated and senior discount notes, a$170 million credit facility and the sale of approxi-mately $250 million of accounts receivable. Given the11.3% retained ownership, the transaction was treatedas a recapitalization for financial reporting purposesand, accordingly, the historical bases of WESCO’sassets and liabilities were not affected.

In connection with the Recapitalization, WESCOrecorded a one-time charge of $51.8 million related toinvestment banking fees of $13.8 million, compensa-tion charges of $11.3 million associated with one-timebonuses paid to certain members of management,transaction fees of $9.5 million paid to Cypress, com-pensation charges of $6.2 million associated with thecash settlement of certain stock options, compensationcharges of $4.1 million associated with the accelera-tion of vesting of one former executive’s stock optionsissued at a discount and other non-capitalized trans-action fees and expenses amounting to $6.9 million.

In connection with the Recapitalization, WESCO paid Cypress $9.5 million in transaction fees andWESCO received $5.8 million from CD&R as contributed capital.

6. ACCOUNTS RECEIVABLE SECURITIZATIONIn June 1999, WESCO and certain of its subsidiariesterminated its previous accounts receivable securi-tization program and entered into a new $350 millionaccounts receivable securitization program(“Receivables Facility”), which was subsequentlyincreased to $375 million. Under the ReceivablesFacility, WESCO sells, on a continuous basis, toWESCO Receivables Corporation, a wholly-owned,special purpose company (“SPC”), an undivided inter-est in all eligible accounts receivable. The SPC sellswithout recourse to a third-party conduit all the receiv-ables while maintaining a subordinated interest, in the form of overcollateralization, in a portion of thereceivables. WESCO has agreed to continue servicingthe sold receivables for the financial institution at market rates; accordingly, no servicing asset or liability has been recorded.


As of December 31, 2000 and 1999, securitizedaccounts receivable totaled approximately $479 million and $391 million, respectively, of which the subordinated retained interest was approximately $101 million and $53 million, respec-tively. Accordingly, approximately $378 million and$338 million of accounts receivable balances wereremoved from the consolidated balance sheets atDecember 31, 2000 and 1999, respectively. Net proceeds from the transactions totaled $40.0 million and $60.0 million in 2000 and 1999, respectively.Costs associated with the Receivables Facility totaled$24.9 million and $19.5 million in 2000 and 1999,respectively. These amounts are recorded as otherexpenses in the consolidated statement of operationsand are primarily related to the discount and loss onthe sale of accounts receivables, partially offset byrelated servicing revenue.

The key economic assumptions used to measure theretained interest at the date of the securitization forsecuritizations completed in 2000 were a discount rate of 7% and an estimated life of 1.5 months. AtDecember 31, 2000, an immediate adverse change inthe discount rate or estimated life of 10% and 20%would result in a reduction in the fair value of theretained interest of $0.4 million and $0.7 million,respectively. These sensitivities are hypothetical andshould be used with caution. As the figures indicate,changes in fair value based on a 10% variation inassumptions generally cannot be extrapolated becausethe relationship of the change in assumption to thechange in fair value may not be linear. Also, in this example, the effect of a variation in a particularassumption on the fair value of the retained interest is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another.

7. ACQUISITIONS On September 11, 1998, WESCO acquired substan-tially all the assets and assumed substantially allliabilities and obligations relating to the operations of Bruckner Supply Company, Inc. (“Bruckner”), a privately owned company headquartered in PortWashington, New York. Bruckner is a provider of integrated supply procurement and outsourcing activities for large industrial companies.

The Bruckner purchase price was $105.1 million, consisting of $78.5 million in cash and a non-interestbearing convertible note discounted to a value of$26.6 million for financial reporting purposes, result-ing in goodwill of $94.0 million. In connection withthe Offering, the note was converted into WESCOcommon stock.

The Bruckner purchase agreement provides for additional contingent consideration, not to exceed$130 million, of which $30 million was paid in 1999.Additional contingent consideration, if any, is to be paid based on a multiple of increases in earningsbefore interest, taxes, depreciation and amortization of Bruckner with respect to calendar years 2001through 2004. Up to 50% of the additional future contingent consideration, if any, may be converted at the election of the holder into common stock at the then market value.

The following unaudited pro forma informationassumes that the Bruckner acquisition had occurred atthe beginning of the period presented. Adjustments to arrive at the pro forma information include, amongothers, those related to acquisition financing, amorti-zation of goodwill and the related tax effects of suchadjustments at an assumed rate of 39%.

Year Ended December 31,1998

(unaudited) (In thousands, except share data)

Net sales $ 3,205,333

Net income (loss) (3,102)

Basic earnings (loss) per share (0.07)

Diluted earnings (loss) per share (0.07)

The pro forma financial information does not purportto present what WESCO’s results of operations wouldhave been if the Bruckner acquisition had actuallyoccurred at the beginning of the period, or to projectWESCO’s results of operations for any future period.

In addition to the Bruckner acquisition, WESCOacquired five other distributors in 1998, the largest ofwhich were Avon Electric Supply (acquired January1998), Brown Wholesale Electric Company (acquiredJanuary 1998) and Reily Electric Supply, Inc. (acquiredMay 1998). In 2000 and 1999, WESCO acquiredthree and four electrical distributors, respectively.Certain acquisitions also contain contingent con-sideration provisions that are not material to theconsolidated financial statements of WESCO. A summary of certain information with respect to all acquisitions follows:

Year EndedDecember 31 2000 1999 1998

(In thousands)

Aggregate

purchase price, including contingent consideration $ 47,801 $ 40,076 $ 250,218

Recorded goodwill 38,223 25,455 162,743


All of the acquisitions were accounted for under the purchase method of accounting for business combinations.The results of operations of these companies are included in the consolidated financial statements prospectivelyfrom the acquisition dates. Pro forma results of these acquisitions, excluding Bruckner, assuming they had beenmade at the beginning of each year presented, would not be materially different from the consolidated resultsreported herein.

8. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT SUPPLIERS WESCO distributes its products and services and extends credit to a large number of customers in the industrial,construction, utility and manufactured structures markets. In addition, one supplier accounted for approximately13%, 13% and 15% of WESCO’s purchases for each of the three years, 2000, 1999 and 1998, respectively.

9. PROPERTY, BUILDINGS AND EQUIPMENT The following table sets forth the components of property, buildings and equipment:

December 31 2000 1999

(In thousands)

Land $ 18,699 $ 19,210

Buildings and leasehold improvements 62,905 59,485

Furniture, fixtures and equipment 67,210 51,680

Software costs 18,406 14,409

167,220 144,784

Accumulated depreciation and amortization (55,984) (42,714)

111,236 102,070

Construction in progress 12,241 14,568

$ 123,477 $ 116,638

10. LONG TERM DEBT The following table sets forth WESCO’s outstandingindebtedness:

December 31 2000 1999

(In thousands)

Revolving credit facility $ 189,624 $ 132,033

Senior subordinated notes 1 291,489 290,342

Other 2,212 3,995

483,325 426,370

Less current portion (585) (3,831)

$ 482,740 $ 422,5391 Net of original issue discount of $723 and $820 and purchase discount of$7,788 and $8,838 in 2000 and 1999, respectively.

During the second quarter of 1999, WESCO completedthe Offering and refinanced the majority of its long-term debt facilities. The proceeds of the Offering of$186.8 million and additional borrowings of $65 mil-lion were used to redeem the $62.8 million seniordiscount notes and repay the existing revolving creditand term loan facilities of $188.8 million. In conjunc-tion with these transactions and the termination of itsprevious accounts receivable securitization program,approximately $8.9 million of deferred financing andother related charges were written off and redemptioncosts of $8.3 million were incurred which resulted in an extraordinary loss of $10.5 million, net ofincome tax benefits of $6.7 million. Additionally,$31.5 million of convertible notes were converted into 1,747,228 shares of WESCO common stock.

Revolving Credit Facility

In June 1999, WESCO Distribution, Inc., a wholly-owned subsidiary of WESCO, entered into a $400 million revolving credit facility with certainfinancial institutions. The revolving credit facility,which matures in June 2004, consists of up to$365 million of revolving loans denominated in U.S.dollars and a Canadian sublimit totaling $35 million.Borrowings under the revolving credit facility are collateralized by substantially all the assets, excludingreal property, of WESCO Distribution, Inc. and areguaranteed by WESCO International, Inc. and certainsubsidiaries.

Borrowings bear rates of interest equal to variousindices, at WESCO’s option, such as LIBOR, PrimeRate or the Federal Funds Rate, plus a borrowingmargin based on WESCO’s financial performance. At December 31, 2000, the interest rate on revolvingcredit facility borrowings was 8.4%. A commitmentfee of 30 to 50 basis points per year is due on unusedportions of the revolving credit facility.


At December 31, 2000, WESCO had three interestrate cap agreements with aggregate notional amountsof $125 million that expire in May and August 2001.The aggregate cost of these agreements is being amor-tized to interest expense on a straight-line basis overthe period of the agreements. The agreements effec-tively provide a ceiling for LIBOR at rates between7.0% and 7.25%.

Senior Subordinated Notes

The senior subordinated notes in an aggregate princi-pal amount of $300 million were issued by WESCODistribution, Inc. The notes are unsecured obligationsand are fully and unconditionally guaranteed byWESCO International, Inc.

The senior subordinated notes bear interest at a statedrate of 9 1/8% payable semiannually on June 1 and December 1 through June 1, 2008. The effective interest rate for the senior subordinated notes is 9.2%.

The senior subordinated notes are redeemable byWESCO Distribution, Inc. at any time prior to June 1,2001, up to a maximum of 35% of the original aggregate principal amount of the senior subordinatednotes, with proceeds of an equity offering at aredemption price equal to 109.125% of the principalamount provided plus accrued and unpaid interest.In addition, the senior subordinated notes are redeem-able at the option of WESCO Distribution, Inc. inwhole or in part, at any time after June 1, 2003 at thefollowing prices:

Redemption Price

2003 104.563%

2004 103.042

2005 101.521

2006 and thereafter 100.000

At any time prior to June 1, 2003, the senior subordi-nated notes may be redeemed, in whole but not inpart, at the option of the Company at any time within180 days after a change of control, at a redemptionprice equal to the principal amount thereof plusaccrued and unpaid interest and the then applicablepremium. In addition, the noteholders have the rightto require WESCO, upon a change of control, torepurchase all or any part of the senior subordinatednotes at a redemption price equal to 101% of the prin-cipal amount provided plus accrued and unpaid interest.

Other

At December 31, 2000 and 1999, other borrowingsprimarily consisted of notes issued to sellers in con-nection with acquisitions.

The following table sets forth the aggregate principalrepayment requirements for all indebtedness for thenext five years:

(In thousands)

2001 $ 585

2002 1,530

2003 30

2004 189,654

2005 30

WESCO’s credit agreements contain various restrictivecovenants that, among other things, impose limitationson (i) dividend payments or certain other restrictedpayments or investments; (ii) the incurrence of addi-tional indebtedness and guarantees or issuance ofadditional stock; (iii) creation of liens; (iv) mergers,consolidation or sales of substantially all of WESCO’sassets; (v) certain transactions among affiliates; (vi)payments by certain subsidiaries to WESCO; and (vii) capital expenditures. In addition, the agreementsrequire WESCO to meet certain leverage, workingcapital and interest coverage ratios.

In December 2000, WESCO amended its revolvingcredit facility which provided additional operatingflexibility and increased the maximum amount allow-able under the accounts receivable securitizationprogram to $475 million from $375 million and alsoamended certain financial covenants. Receivables soldunder the accounts receivable securitization programin excess of $375 million will permanently reduce theamount available under the revolving credit facility on a dollar for dollar basis.

WESCO is permitted to pay dividends under certainlimited circumstances. At December 31, 2000 and 1999, no retained earnings were available for dividend payments.

WESCO had $0.5 million and $4.2 million of out-standing letters of credit at December 31, 2000 and1999, respectively. These letters of credit are used ascollateral for performance and bid bonds. The fair valueof the letters of credit approximates the contract value.


The following table sets forth capital stock share activity:

Class B RedeemableCommon Stock Treasury Stock Common Stock Common Stock

December 31, 1997 53,943,584 — — 5,161,887

Recapitalization, net (28,816,421) — 4,653,131 (1,621,059)

Shares issued — — — 1,559,675

Shares repurchased — — — (556,961)

Options exercised 82,654 — — 358,360

December 31, 1998 25,209,817 — 4,653,131 4,901,902

Shares issued 11,183,750 — — —

Termination of redemption rights 4,901,902 — — (4,901,902)

Conversion of convertible notes 1,747,228 — — —

Treasury shares purchased — (632,700) — —

Options exercised 248,622 (4,559) — —

December 31, 1999 43,291,319 (637,259) 4,653,131 —

Treasury shares purchased — (3,265,300) — —

Options exercised 802,345 (74,338) — —

December 31, 2000 44,093,664 (3,976,897) 4,653,131 —

In May 2000, WESCO’s board of directors authorized an additional $25 million to be added to its existing $25 million share repurchase program which was authorized in November 1999. WESCO’s common stock maybe purchased at management’s discretion, subject to certain financial ratios, in open market transactions and the program may be discontinued at any time. As of December 31, 2000, the Company had purchased 3,898,000shares of its common stock for $32.8 million pursuant to this program.

11. CAPITAL STOCK

Preferred Stock

There are 20,000,000 shares of preferred stock author-ized at a par value of $.01 per share. The Board ofDirectors has the authority, without further action by the stockholders, to issue all authorized preferredshares in one or more series and to fix the number of shares, designations, voting powers, preferences,optional and other special rights and the restrictions or qualifications thereof. The rights, preferences, privileges and powers of each series of preferredstock may differ with respect to dividend rates, liquidation values, voting rights, conversion rights,redemption provisions and other matters.

Common Stock

There are 210,000,000 shares of common stock and20,000,000 shares of Class B common stock author-ized at a par value of $.01 per share. The Class Bcommon stock is identical to the common stock,

except for voting and conversion rights. The holdersof Class B common stock have no voting rights. Withcertain exceptions, Class B common stock may beconverted, at the option of the holder, into the samenumber of shares of common stock.

Redeemable Common Stock

Prior to the Offering, certain employees and key management of WESCO held common stock andoptions that required WESCO to repurchase, undercertain conditions, death, disability or terminationwithout cause during the term of employment, all ofthe shares and the exercisable portion of the optionsheld. In connection with these redemption features,WESCO had classified outside of permanent equity,an amount representing the initial fair value of theredeemable shares. These shares and exercisableoptions were not marked to market since the events ofredemption were considered remote. This repurchaseright terminated upon the consummation of theOffering and as a result, the redeemable shares werereclassified to stockholders’ equity.


12. INCOME TAXES The following table sets forth the components of the provision for income taxes before extraordinary item:


(In thousands)

Current taxes:Federal $ 19,097 $ 8,850 $ 4,843

State 1,030 (311) 1,229

Foreign 388 1,076 77

Total current 20,515 9,615 6,149

Deferred taxes:Federal 1,332 10,767 1,926

State 183 2,779 431

Foreign 1,245 172 13

Total deferred 2,760 13,718 2,370

$ 23,275 $ 23,333 $ 8,519

The following table sets forth the components of income before income taxes and extraordinary item by jurisdiction:


(In thousands)

United States $ 52,963 $ 54,070 $ 71

Foreign 3,750 4,408 712

$ 56,713 $ 58,478 $ 783

The following table sets forth the reconciliation between the federal statutory income tax rate and the effective rate:


Federal statutory rate 35.0% 35.0% 35.0%

State taxes, net of federal tax benefit 1.4 2.7 137.8

Nondeductible expenses 3.4 2.9 206.2

Recapitalization costs — — 657.8

Foreign taxes 0.3 (0.3) (51.1)

Other 1 0.9 (0.4) 102.3

41.0% 39.9% 1,088.0%1 Includes the impact of adjustments for certain tax liabilities and the effect of differences between the recorded provision and the final filed tax return for the prior year.


Options to purchase 3.8 million shares of commonstock at a weighted average exercise price of$10.62 per share were outstanding as of December 31,2000 but were not included in the computation ofdiluted earnings per share because the option exercise prices were greater than the average market price ofWESCO common stock.

Interest on convertible debt of $1.3 million and common share equivalents outstanding of 6,630,180were anti-dilutive and, accordingly, were not considered in the computation of diluted loss pershare for the year ended December 31, 1998.

14. EMPLOYEE BENEFIT PLANS A majority of WESCO’s employees are covered bydefined contribution retirement savings plans for theirservice rendered subsequent to WESCO’s formation.U.S. employee contributions of not more than 6% ofeligible compensation are matched 50% by WESCO.WESCO’s contributions for Canadian employeesrange from 1% to 6% of eligible compensation basedon years of service.

In addition, employer contributions may be made at the discretion of the Board of Directors and can be based on WESCO’s current year performance. For the years ended December 31, 2000, 1999 and1998, WESCO contributed $7.6 million, $6.0 million and $14.1 million, respectively, which was charged to expense.

The following table sets forth deferred tax assets and liabilities:

December 31 2000 1999

(In thousands)

Accounts receivable $ 6,512 $ 5,185

Inventory 6,077 5,591

Other 1,568 804

Deferred tax assets 14,157 11,580

Intangibles (14,539) (11,874)

Property, buildings and equipment (8,497) (6,203)

Other (8,605) (8,583)

Deferred tax liabilities (31,641) (26,660)

$ (17,484) $ (15,080)

13. EARNINGS PER SHARE Basic earnings per share is computed by dividing net income by the weighted average common shares outstand-ing during the periods. Diluted earnings per share are computed by dividing net income by the weighted averagecommon shares and common share equivalents outstanding during the periods. The dilutive effect of commonshare equivalents is considered in the diluted earnings per share computation using the treasury stock method.

The following table sets forth the details of basic and diluted earnings per share:


(Dollars in thousands, except share data)

Income (loss) before extraordinary item $ 33,438 $ 35,145 $ (7,736)

Interest on convertible debt — 595 —

Earnings (loss) used in diluted earnings (loss) per share $ 33,438 $ 35,740 $ (7,736)

Weighted average common shares outstanding used in computing basic earnings (loss) per share 45,326,475 43,057,894 45,051,632

Common shares issuable upon exercise of dilutive stock options 2,420,132 3,516,733 —

Assumed conversion of convertible debt — 949,912 —

Weighted average common shares outstanding and common share equivalents used in computing diluted earnings (loss) per share 47,746,607 47,524,539 45,051,632

Earnings (loss) per share before extraordinary item

Basic $ 0.74 $ 0.82 $ (0.17)

Diluted 0.70 0.75 (0.17)


15. STOCK INCENTIVE PLANS

Stock Purchase Plans

In connection with the Recapitalization, WESCOestablished a stock purchase plan (“1998 StockPurchase Plan”) under which certain employees maybe granted an opportunity to purchase WESCO’scommon stock. The maximum number of sharesavailable for purchase may not exceed 427,720.During 1998, 291,890 shares were issued at a weightedaverage share price of $10.75. There were no sharesissued in 2000 or 1999.

In 1994, WESCO established a stock purchase plan(“1994 Stock Purchase Plan”) under which certainemployees were granted an opportunity to purchaseWESCO’s common stock. Future purchases of sharesunder the 1994 Stock Purchase Plan were terminatedin conjunction with the establishment of the 1998Stock Purchase Plan. During 1998, 132,478 shareswere issued at a weighted average share price of $10.75.

Other Stock Purchases

In addition, certain key management employees ofWESCO, nonemployee directors and other investorsmay be granted an opportunity to purchase WESCO’scommon stock. At December 31, 1998 and 1999,4,265,178 shares had been purchased. During 1998,1,135,308 shares were purchased at a weighted average share price of $10.75. There were no sharespurchased in 2000 or 1999.

Stock Option Plans

WESCO has sponsored four stock option plans, the1999 Long-Term Incentive Plan (“LTIP”), the 1998Stock Option Plan, the Stock Option Plan for BranchEmployees and the 1994 Stock Option Plan. The LTIPwas designed to be the successor plan to all priorplans. Outstanding options under prior plans will continue to be governed by their existing terms, whichare substantially similar to the LTIP. Any remainingshares reserved for future issuance under the priorplans are available for issuance under the LTIP. TheLTIP is administered by the Compensation Committeeof the Board of Directors.

An initial reserve of 6,936,000 shares of commonstock has been authorized for issuance under the LTIP.This reserve automatically increases by (i) the numberof shares of common stock covered by unexercisedoptions granted under prior plans that are canceled orterminated after the effective date of the LTIP and (ii)the number of shares of common stock surrendered byemployees to pay the exercise price and/or minimumwithholding taxes in connection with the exercise ofstock options granted under our prior plans.

Options granted vest and become exercisable overperiods ranging from four to five years or earlierbased on WESCO achieving certain financial perfor-mance criteria. All options vest immediately in theevent of a change in control. Each option terminateson the tenth anniversary of its grant date unless terminated sooner under certain conditions.

In connection with the Recapitalization, all optionsgranted under the 1994 Stock Option Plan becamefully vested.

All awards under WESCO’s stock incentive plans are designed to be issued at fair market value.

The following sets forth shares of common stockreserved for future issuance at December 31, 2000:

Stock Purchase Plan 135,830

LTIP 7,466,000


The following table sets forth a summary of stock option activity and related information for the years indicated:

2000 1999 1998

Weighted Weighted WeightedAverage Average Average

Options Exercise Price Options Exercise Price Options Exercise Price

Beginning of year 9,254,770 $ 5.44 9,527,290 $ 5.34 6,926,983 $ 2.20

Granted 1 1,606,000 9.21 14,675 18.00 4,121,140 9.76

Exercised (802,345) 2.27 (248,622) 2.31 (1,134,383) 2.68

Canceled (470,119) 9.54 (38,573) 3.38 (386,450) 3.83

End of year 9,588,306 6.13 9,254,770 5.44 9,527,290 5.34

Exercisable at end of year 6,043,337 $ 4.33 6,193,150 $ 3.33 5,133,912 $ 2.051 Options granted in 1998 include 635,800 options that were issued at a discount, resulting in approximately $4.1 million of compensation expense. Of these options,358,360 were subsequently exercised. The remaining 277,440 were canceled and the associated costs were classified as additional capital.

The following table sets forth exercise prices for options outstanding as of December 31, 2000:

Options Options Weighted AverageExercise Price Outstanding Exercisable Remaining Contractual Life

$ 1.73 2,976,432 2,976,432 3.5

1.98 689,959 689,959 5.0

3.38 1,152,768 749,089 6.0

4.34 82,654 82,654 7.0

7.75 488,500 — 9.2

9.31 22,500 — 9.8

9.88 1,079,500 — 9.4

10.75 3,081,318 1,540,659 7.6

18.00 14,675 4,544 8.4

9,588,306 6,043,337

In connection with the implementation of SFAS No. 123, “Accounting for Stock-Based Compensation,” WESCOhas elected to continue to account for stock-based compensation arrangements under the provisions of AccountingPrinciples Board (APB) Opinion No. 25.

If compensation costs had been determined based on the fair value at the grant dates according to SFAS No. 123,WESCO’s net income and earnings per share would have been as follows:



Net income (loss)

As reported $ 33,438 $ 24,638 $ (7,736)

Pro forma 30,979 22,912 (8,629)

Basic earnings (loss) per share

As reported $ 0.74 $ 0.57 $ (0.17)

Pro forma 0.68 0.53 (0.19)

Diluted earnings (loss) per share

As reported $ 0.70 $ 0.53 $ (0.17)

Pro forma 0.65 0.49 (0.19)

The weighted average fair value per option granted was $4.82, $8.00 and $3.86, for the years endedDecember 31, 2000, 1999 and 1998, respectively.

For purposes of presenting pro forma results, the fair value of each option grant is estimated on the date of grantusing the Black-Scholes option pricing model and the following assumptions:


Risk-free interest rate 6.0% 6.0% 5.0%

Expected life (years) 6.0 7.0 7.0

Stock price volatility 45.0% 30.0% —


16. COMMITMENTS AND CONTINGENCIES Future minimum rental payments required under operating leases, primarily for real property that have noncancelable lease terms in excess of one year as of December 31, 2000, are as follows:

(In thousands)

2001 $ 21,421

2002 16,102

2003 12,503

2004 9,574

2005 5,440

Thereafter 10,044

Rental expense for the years ended December 31,2000, 1999 and 1998, was $30.3 million, $33.3 mil-lion and $29.1 million, respectively.

WESCO has litigation arising from time to time in thenormal course of business. In management’s opinion,any present litigation WESCO is aware of will notmaterially affect WESCO’s consolidated financialposition, results of operations or cash flows.

17. SEGMENTS AND RELATED INFORMATION WESCO is engaged principally in one line of business—the sale of electrical products and maintenance repair andoperating supplies—which represents more than 90% of the consolidated net sales, income from operations andassets, for 2000, 1999 and 1998. There were no material amounts of sales or transfers among geographic areasand no material amounts of export sales.

The following table sets forth information about WESCO by geographic area:

Net Sales Long-Lived AssetsYear Ended December 31 December 31

2000 1999 1998 2000 1999 1998

(In thousands)

United States $ 3,494,527 $ 3,059,901 $ 2,713,213 $ 392,820 $ 357,696 $ 344,481

Canada 319,823 288,203 272,463 11,286 11,157 10,483

Other Foreign 66,746 75,754 39,763 1,702 1,881 1,889

$ 3,881,096 $ 3,423,858 $ 3,025,439 $ 405,808 $ 370,734 $ 356,853

18. SUPPLEMENTAL CASH FLOW INFORMATION The following table sets forth supplemental cash flow information:


(In thousands)

Details of acquisitions:

Fair value of assets acquired $ 63,764 $ 47,425 $ 307,056

Deferred acquisition payment 3,353 30,000 —

Liabilities assumed (15,963) (7,349) (56,838)

Notes issued to seller (2,500) (1,500) (46,242)

Deferred acquisition payable (7,750) (8,593) (30,000)

Cash paid for acquisitions $ 40,904 $ 59,983 $ 173,976

Cash paid for interest $ 41,676 $ 42,817 $ 35,093

Cash paid for income taxes 19,589 5,249 9,470

Noncash investing activities not reflected in the consolidated statement of cash flows for 2000 consisted of thewrite-off of a $4.0 million investment in an affiliate. Noncash financing activities not reflected in the consolidatedstatement of cash flows for 1999 consisted of the conversion of $31.5 million of notes payable to common stock.Noncash investing and financing activities not reflected in the consolidated statement of cash flows for 1998 consisted of the $5.8 million use of restricted cash to reduce long-term debt, $5.2 million of capital expendituresincluded in accounts payable and the conversion of $1.6 million of notes payable to redeemable common stock.


19. OTHER FINANCIAL INFORMATIONIn June 1998, WESCO Distribution, Inc. issued $300 million of 91/8% senior subordinated notes. The senior subordinated notes are fully and unconditionally guaranteed by WESCO International, Inc. on a subordinatedbasis to all existing and future senior indebtedness of WESCO International, Inc. Condensed consolidating financial information for WESCO International, Inc., WESCO Distribution, Inc. and the non-guarantor sub-sidiaries are as follows:

Condensed Consolidating Balance SheetsConsolidating

WESCO WESCO Non- andInternational Distribution, Guarantor Eliminating

December 31, 2000 Inc. Inc. Subsidiaries Entries Consolidated

(In thousands)

Cash and cash equivalents $ 10 $ 14,911 $ — $ 6,158 $ 21,079

Trade accounts receivable — 43,790 216,198 — 259,988

Inventories — 383,025 38,058 — 421,083

Other current assets — 63,212 4,492 (5,629) 62,075

Total current assets 10 504,938 258,748 529 764,225

Intercompany receivables, net — 317,818 32,364 (350,182) —

Property, buildings and equipment, net — 53,280 70,197 — 123,477

Goodwill and other intangibles, net — 271,690 6,073 — 277,763

Investments in affiliates and other noncurrent assets 482,026 295,094 117 (772,669) 4,568

Total assets $ 482,036 $ 1,442,820 $ 367,499 $ (1,122,322) $ 1,170,033

Accounts payable $ — $ 410,171 $ 44,206 $ 6,158 $ 460,535

Other current liabilities 5,629 54,828 8,479 (5,629) 63,307

Total current liabilities 5,629 464,999 52,685 529 523,842

Intercompany payables, net 350,182 — — (350,182) —

Long-term debt — 460,416 22,324 — 482,740

Other noncurrent liabilities — 35,379 3,085 — 38,464

Stockholders’ equity 126,225 482,026 289,405 (772,669) 124,987

Total liabilities and stockholders’ equity $ 482,036 $ 1,442,820 $ 367,499 $ (1,122,322) $ 1,170,033

ConsolidatingWESCO WESCO Non- and

International Distribution, Guarantor EliminatingDecember 31, 1999 Inc. Inc. Subsidiaries Entries Consolidated

(In thousands)

Cash and cash equivalents $ 10 $ — $ 26,812 $ (18,003) $ 8,819Trade accounts receivable — 23,781 164,526 — 188,307Inventories — 359,481 38,188 — 397,669Other current assets — 48,552 13,069 (2,615) 59,006

Total current assets 10 431,814 242,595 (20,618) 653,801Intercompany receivables, net — 342,405 — (342,405) —Property, buildings and equipment, net — 46,709 69,929 — 116,638Goodwill and other intangibles, net — 242,834 6,406 — 249,240Investments in affiliates and other

noncurrent assets 459,042 243,328 179 (693,435) 9,114Total assets $ 459,052 $ 1,307,090 $ 319,109 $ (1,056,458) $ 1,028,793

Accounts payable $ 1,457 $ 374,938 $ 48,571 $ (18,003) $ 406,963Other current liabilities 2,615 41,056 6,766 (2,615) 47,822

Total current liabilities 4,072 415,994 55,337 (20,618) 454,785Intercompany payables, net 336,976 — 5,429 (342,405) —Long-term debt — 398,455 24,084 — 422,539Other noncurrent liabilities — 33,599 565 — 34,164Stockholders’ equity 118,004 459,042 233,694 (693,435) 117,305

Total liabilities andstockholders’ equity $ 459,052 $ 1,307,090 $ 319,109 $ (1,056,458) $ 1,028,793


Condensed Consolidating Statements of OperationsConsolidating


Year ended December 31, 2000 Inc. Inc. Subsidiaries Entries Consolidated

(In thousands)

Net sales $ — $ 3,497,076 $ 384,020 $ — $ 3,881,096

Cost of goods sold — 2,882,626 314,326 — 3,196,952

Selling, general and administrative expenses — 476,680 47,629 — 524,309

Depreciation and amortization — 21,951 3,042 — 24,993

Restructuring charge — 9,094 310 — 9,404

Results of affiliates’ operations 22,984 56,250 — (79,234) —

Interest expense (income), net (16,083) 68,164 (8,301) — 43,780

Other (income) expense — 85,005 (60,060) — 24,945

Provision for income taxes 5,629 (13,178) 30,824 — 23,275

Net income (loss) $ 33,438 $ 22,984 $ 56,250 $ (79,234) $ 33,438

ConsolidatingWESCO WESCO Non- and

International Distribution, Guarantor EliminatingYear ended December 31, 1999 Inc. Inc. Subsidiaries Entries Consolidated

(In thousands)

Net sales $ — $ 3,083,173 $ 340,685 $ — $ 3,423,858

Cost of goods sold — 2,528,631 278,609 — 2,807,240

Selling, general and administrative expenses — 426,181 45,094 — 471,275

Depreciation and amortization — 17,733 2,617 — 20,350

Results of affiliates’ operations 26,446 52,047 — (78,493) —

Interest expense (income), net (5,075) 60,729 (8,686) — 46,968

Other (income) expense — 79,595 (60,048) — 19,547

Provision for income taxes 1,776 (7,195) 28,752 — 23,333

Income (loss) before extraordinary item 29,745 29,546 54,347 (78,493) 35,145

Extraordinary item, net of tax benefit (5,107) (3,100) (2,300) — (10,507)

Net income (loss) $ 24,638 $ 26,446 $ 52,047 $ (78,493) $ 24,638

Condensed Consolidating Statements of Cash Flows Consolidating



(In thousands)

Net cash provided (used) by operating activities $ 13,585 $ 32,332 $ (23,167) $ 24,161 $ 46,911

Investing activities:

Capital expenditures — (18,167) (3,385) — (21,552)

Acquisitions — (40,904) — — (40,904)

Other — 267 1,500 — 1,767

Net cash used in investing activities — (58,804) (1,885) — (60,689)

Financing activities:

Net borrowings (repayments) 13,206 41,858 (1,760) — 53,304

Equity transactions (26,791) — — — (26,791)

Other — (475) — — (475)

Net cash (used in) provided by financing activities (13,585) 41,383 (1,760) — 26,038

Net change in cash and cash equivalents — 14,911 (26,812) 24,161 12,260

Cash and cash equivalentsat beginning of year 10 — 26,812 (18,003) 8,819

Cash and cash equivalentsat end of period $ 10 $ 14,911 $ — $ 6,158 $ 21,079


Condensed Consolidating Statements of Cash Flows Consolidating



(In thousands)

Net cash provided (used) by operating activities $ (36) $ 84,962 $ (567) $ (18,003) $ 66,356

Investing activities:

Capital expenditures — (17,452) (3,778) — (21,230)

Acquisitions — (59,983) — — (59,983)

Other — 8,717 600 — 9,317

Net cash used in investing activities — (68,718) (3,178) — (71,896)

Financing activities:

Net borrowings (repayments) (182,680) (14,084) 22,464 — (174,300)

Equity transactions 182,726 — — — 182,726

Other — (2,160) — — (2,160)

Net cash (used in) provided by financing activities 46 (16,244) 22,464 — 6,266

Net change in cash and cash equivalents 10 — 18,719 (18,003) 726

Cash and cash equivalents at beginning of year — — 8,093 — 8,093

Cash and cash equivalents at end of period $ 10 $ — $ 26,812 $ (18,003) $ 8,819

20. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)The following table sets forth selected quarterly financial data for the years ended December 31, 2000 and 1999:

First Second Third FourthQuarter Quarter 2 Quarter Quarter 1


2000Net sales 3 $ 925,022 $ 990,931 $ 976,332 $ 988,811

Gross profit 3 165,018 173,872 178,951 166,303

Income from operations 31,374 38,077 42,354 13,633

Income (loss) before income taxes 15,233 21,350 24,314 (4,184)

Net income (loss) 9,155 12,831 14,603 (3,151)

Basic earnings (loss) per share 0.20 0.28 0.32 (0.07)

Diluted earnings (loss) per share 0.19 0.27 0.31 (0.07)

1999Net sales 3 $ 777,630 $ 864,669 $ 904,703 $ 876,856

Gross profit 3 139,008 157,519 157,845 162,246

Income from operations 23,914 36,527 38,240 26,312

Income before income taxes and extraordinary item 4,841 19,262 22,865 11,510

Income before extraordinary item 2,917 11,548 13,757 6,923

Net income 2,917 1,041 13,757 6,923

Basic earnings per share before extraordinary item 0.08 0.28 0.29 0.14

Diluted earnings per share before extraordinary item 0.08 0.25 0.27 0.14

Basic earnings per share 0.08 0.03 0.29 0.14

Diluted earnings per share 0.08 0.03 0.27 0.141 The fourth quarter of 2000 includes a restructuring charge of $9.4 million (see Note 4).2 The second quarter of 1999 includes an extraordinary charge of $10.5 million, net of tax, in connection with the early extinguishment of certain debt and refinancing ofits credit agreement (see Note 10).

3 All quarters include the impact of the reclassification of freight billed to customers in accordance with the EITF No. 00-10. The impact was $1.7 million, $1.6 million,$1.7 million and $1.4 million for each of the quarters in 2000 and $0.2 million, $0.5 million, $1.5 million and $1.5 million for each of the quarters in 1999.


REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Stockholders and Board of Directors of WESCO International, Inc.:

Our audits of the consolidated financial statements referred to in our report dated February 9, 2001 also includedan audit of the financial statement schedule listed in the index appearing under Item 14(a)(2) on page 33 of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

PricewaterhouseCoopers LLP600 Grant Street Pittsburgh, Pennsylvania

February 9, 2001


SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTSCol. A Col. B Col. C Col. D Col. E

Additions

Balance At Charged To Balance AtBeginning Charged To Other End ofof Period Expense Accounts Deductions b Period

Allowance for doubtful accounts:

Year ended December 31, 2000 7,023 9,970 574 a (7,773) 9,794

Year ended December 31, 1999 8,082 2,465 604 a (4,128) 7,023

Year ended December 31, 1998 10,814 2,325 3,423 a (8,480) 8,082a Represents allowance for doubtful accounts in connection with certain acquisitions.b Includes a reduction in the allowance for doubtful accounts related to the sale of receivables at fair market value in connection with the Receivables Facility.


INDEX TO EXHIBITSThe registrant hereby agrees to furnish supplementally to the Commission, upon request, a copy of any omittedschedule to any of the agreements contained herein.

Exhibit No. Description Of Exhibit Prior Filing Or Sequential Page Number

2.1 Recapitalization Agreement dated as of Incorporated by reference to WESCO’s Exhibit 2.1 March 27, 1998 among Thor Acquisitions to the Registration Statement on Form S-4 (No. 333-43225) L.L.C., WESCO International, Inc. (formerly (the “Form S-4”)known as CDW Holding Corporation, “WESCO”) and certain securityholders of WESCO.

2.2 Purchase Agreement dated May 29, 1998 Incorporated by reference to Exhibit 2.2 to the Form S-4among WESCO, WESCO Distribution, Inc. (“WESCO Distribution”), Chase Securities Inc.and Lehman Brothers Inc.

2.3 Asset Purchase Agreement among Bruckner Incorporated by reference to Exhibit 2.01 to the CurrentSupply Company, Inc. and WESCO Report on Form 8-K dated September 11, 1998Distribution dated September 11, 1998, previously filed.

3.1 Amended and Restated Certificate of Incorporated by reference to Exhibit 3.2 to the Form S-1Incorporation of WESCO. (No. 333-73299) (the “Form S-1”)

3.2 By-Laws of WESCO. Incorporated by reference to Exhibit 3.3 to the Registration Statement on Form S-1

4.1 Indenture dated as of June 5, 1998 among Incorporated by reference to Exhibit 4.1 to the Form S-4WESCO, WESCO Distribution and Bank One, N.A.

4.2 Form of 91/8% Senior Subordinated Note Incorporated by reference to Exhibit 4.2 to the Form S-4Due 2008, Series A (included in Exhibit 4.3).

4.3 Form of 91/8% Senior Subordinated Note Incorporated by reference to Exhibit 4.3 to the Form S-4Due 2008, Series B (included in Exhibit 4.3).

4.4 Exchange and Registration Rights Agreement Incorporated by reference to Exhibit 4.4 to the Form S-4dated as of June 5, 1998 among the Company, WESCO and the Initial Purchasers.

4.8 Exchange and Registration Rights Agreement Incorporated by reference to Exhibit 4.8 to the Form S-4dated as of June 5, 1998 among WESCO andthe Initial Purchasers.

10.1 CDW Holding Corporation Stock Purchase Plan. Incorporated by reference to Exhibit 10.1 to the Form S-4

10.2 Form of Stock Subscription Agreement. Incorporated by reference to Exhibit 10.2 to the Form S-4

10.3 CDW Holding Corporation Stock Option Plan. Incorporated by reference to Exhibit 10.3 to the Form S-4

10.4 Form of Stock Option Agreement. Incorporated by reference to Exhibit 10.4 to the Form S-4

10.5 CDW Holding Corporation Stock Option Plan Incorporated by reference to Exhibit 10.5 to the Form S-4for Branch Employees.

10.6 Form of Branch Stock Option Agreement. Incorporated by reference to Exhibit 10.6 to the Form S-4

10.7 Non-Competition Agreement dated as of Incorporated by reference to Exhibit 10.8 to the Form S-4February 28, 1996, between Westinghouse, WESCO and WESCO Distribution.

10.8 Lease dated May 24, 1995 as amended by Incorporated by reference to Exhibit 10.10 to the Form S-4Amendment One dated June 1995 and byAmendment Two dated December 24, 1995 by and between WESCO Distribution as Tenant and Opal Investors, L.P. and MuralGEM Investors as Landlord.

10.9 Lease dated April 1, 1992 as renewed by Incorporated by reference to Exhibit 10.11 to the Form S-4Letter of Notice of Intent to Renew dated December 13, 1996 by and between the Company successor in interest to Westinghouse Electric Corporation as Tenant and Utah State Retirement Fund as Landlord.

10.10 Lease dated September 4, 1997 between Incorporated by reference to Exhibit 10.12 to the Form S-4WESCO Distribution as Tenant and The Buncher Company as Landlord.

10.11 Lease dated March 1995 by and between Incorporated by reference to Exhibit 10.13 to the Form S-4WESCO Distribution-Canada, Inc. (“WESCO Canada”) as Tenant and Atlantic Construction, Inc. as Landlord.


10.18 Amended and Restated Registration and Incorporated by reference to Exhibit 10.19 to the Form S-4Participation Agreement dated June 5, 1998 among WESCO and certain securityholders of WESCO named therein.

10.19 Employment Agreement between WESCO Incorporated by reference to Exhibit 10.20 to the Form S-4Distribution and Roy W. Haley.

10.20 WESCO International, Inc. 1998 Incorporated by reference to WESCO’s Exhibit 10.1 toStock Option Plan. Quarterly Report on Form 10-Q for the quarter ended

September 30, 1998

10.21 Form of Management Stock Option Agreement. Incorporated by reference to WESCO’s Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1998

10.22 1999 Deferred Compensation Plan for Incorporated by reference to WESCO’s Exhibit 10.22 toNon-Employee Directors. Annual Report on Form 10-K for the year ended

December 31, 1998

10.23 Credit Agreement among WESCO Incorporated by reference to WESCO’s Exhibit 10.1 toDistribution, Inc., WESCO Quarterly Report on Form 10-Q for the period endedDistribution-Canada, Inc., WESCO June 30, 1999 (the “Second Quarter Form 10-Q”)International, Inc. and the Lenders identified therein, dated June 29, 1999.

10.24 Amendment, dated December 20, 2000, to Filed herewiththe Credit Agreement among WESCO Distribution, Inc., WESCO Distribution-Canada, Inc., WESCO International, Inc. and theLenders identified therein, dated June 29, 1999.

10.25 Receivables Purchase Agreement dated Incorporated by reference to Exhibit 10.2 to the Secondas of June 30, 1999, among WESCO Quarter Form 10-QReceivables Corp., WESCO Distribution, Inc., Market Street Capital Corp. and PNC Bank, National Association.

10.26 Amended and Restated Receivables Purchase Incorporated by reference to WESCO’s Exhibit 10.1 toAgreement, dated as of September 28, 1999, Quarterly Report on Form 10-Q for the period endedamong WESCO Receivables Corp., September 30, 1999WESCO Distribution, Inc., and PNC Bank, National Association.

10.27 1999 Long-Term Incentive Plan. Incorporated by reference to WESCO’s Exhibit 10.22 to Form S-1

21.1 Subsidiaries of WESCO. Incorporated by reference to Exhibit 21.1 to the Registration Statement on Form S-1

23.1 Consent of PricewaterhouseCoopers LLP, Filed herewithIndependent Accountants.

BOARD OF DIRECTORSRoy W. Haley 1

Chairman and Chief Executive Officer, WESCO

Michael J. Cheshire 1,2

Chairman and Chief Executive Officer, Gerber Scientific, Inc.

George L. Miles, Jr. 2

President and Chief Executive Officer, WQED Pittsburgh

James L. Singleton 1,3

Vice Chairman, The Cypress Group

James A. Stern 1,3

Chairman, The Cypress Group

Robert J. Tarr, Jr. 2,3

Chairman, Chief Executive Officer and President,

HomeRuns.com, Inc.

Anthony D. Tutrone 3

Principal, The Cypress Group

Kenneth L. Way 3

Chairman, Lear Corporation

1 Executive Committee2 Audit Committee3 Compensation Committee

EXECUTIVE OFFICERSRoy W. HaleyChairman and Chief Executive Officer

William M. GoodwinVice President, Operations

James H. MehtaVice President, Business Development

Robert B. RosenbaumVice President, Operations

Patrick M. SwedVice President, Operations

Donald H. ThimjonVice President, Operations

Ronald P. Van, Jr.Vice President, Operations

Stephen A. Van OssVice President, Chief Financial Officer

Daniel A. BrailerTreasurer and Corporate Secretary

CORPORATE HEADQUARTERSCommerce Court, Suite 700Four Station SquarePittsburgh, PA 15219Phone: 412-454-2200www.wescodist.com

INVESTOR RELATIONSFor questions regarding WESCO, contact Daniel A. Brailer, Treasurer, at [email protected]. A copy of the Company’s Annual Report on Form 10-K or other financial information may be requested through our web site (www.wescodist.com) or by contacting Investor Relations.

COMMON STOCKWESCO International, Inc. is listed on the New York Stock Exchange under the ticker symbol WCC.

ANNUAL MEETINGThe Annual Meeting of shareholders will be held on Wednesday, May 23, 2001, at 2:00 p.m., E.S.T., at the Sheraton Station Square Hotel, Pittsburgh, PA.

TRANSFER AGENTMellon Investor Services, L.L.C.85 Challenger RoadOverpeck CentreRidgefield Park, NJ 07660www.mellon-investor.com Phone: 1-800-756-3353Outside the U.S.: 1-201-329-8660

The hearing disabled can access TDD service at: 1-800-231-5469 (within the U.S.) or 1-201-329-8354.

INDEPENDENT PUBLIC ACCOUNTANTSPricewaterhouseCoopers LLPPittsburgh, PA

An online version of the Annual Report is available at www.wescodist.com/annualreport

Design Mizrahi Design Associates, Inc. www.mizrahidesign.com

WESCO International, Inc.

Commerce Court, Suite 700

Four Station Square

Pittsburgh, PA 15219

www.wescodist.com

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